If you've heard about cryptocurrencies and you want into the club, you've come to the right place. Investing can mean big risks, and investors get nervous because Bitcoin isn't backed by fiat currency, or real money in a federal treasury. But higher security and peer-to-peer transactions without third party involvement are big reasons to buy in.
Here's a basic guide to cryptos, from why they're taking off to what risks are involved and how you can invest. If you want to know where to get started and how to invest in cryptocurrency, read on.
Is It Risky?
Cryptos are decentralized, without regulation by any one administration. Facebook's Libra may change that, although it's losing support. For communities that like having FDIC insurance, investing large sums into cryptos seems too risky.
Digital currencies are also unrecoverable. Hackers or thieves can impersonate you and access your private keys. Then they can wipe out the files where you store your digital currency, and then it's just gone.
Other investors are wary because of the variable value. You're hoping that people will soon value Bitcoin more than they did when you bought it, so you can sell at a profit. If the crypto fad went away, then the value would also be gone, unlike investing in a company with intrinsic value.
How to Invest in Cryptocurrency the Easy Way
Whether you're a new investor or you've bought the investing t-shirt, the easiest way to get started buying cryptos is to use a platform like Robinhood, a stock trading app without commission fees. You can buy as many shares as you like and sell whenever, and you don't need a minimum deposit.
Other places to buy and store cryptocurrencies include digital wallets like Coinbase and Bitfinex. Useful features include a debit card and the ability to buy shares of a coin, so that you don't have to invest thousands of dollars right away. One coin is usually worth at least a few thousand dollars, if not tens of thousands.
Store your digital currency somewhere safe. A hardware wallet, like a thumb drive where you keep the information, isn't as accessible as your digital wallet. Treat it like your savings account, and protect it like your other financial information.
The Harder Way to Invest in Cryptos
You can mine Bitcoin yourself, which is like minting your own money. It's harder than buying from a trading platform, and there's also some luck involved. You have to be the first one to arrive at the right answer to get the payment.
As a miner, you'll make sure people aren't using their Bitcoin for more than one transaction, or double-spending it. Because miners do this work, the currency can remain decentralized, with no bigger authority governing it. Some miners join a pool so they have more computing power and then they split the profits.
There is only a finite amount of Bitcoin that can be mined. For some newer cryptocurrencies this won't be true, like in Iran, but there's some skepticism that digital currency won't be popular if you take away its decentralization or non-fiat-based characteristics.
Bitcoin and other digital currencies like Ethereum aren't losing steam. More and more Bitcoin ATMs are popping up, and even the federal government is getting involved by proposing bills to regulate Bitcoin.
Now that you know how to invest in cryptocurrency, you can get started with your own methods, whether you choose an investing app or mining your own.
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