Table of Contents
What is cryptocurrency?
A cryptocurrency is a form of the amount that can be exchanged online for assets and services. Many corporations have issued their currencies, often called tokens, and these can be traded especially for the good or service that the organization provides.
Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.
Cryptocurrencies work using a technology called a blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions. Part of the appeal of this technology is its security.
A cryptocurrency, or crypto is a collection of binary data which is designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger which is … Wikipedia.
How many cryptocurrencies are there? What are they worth?
More than 10,000 different cryptocurrencies are traded openly, according to CoinMarketCap.com, a market research website. And cryptocurrencies proceed to proliferate, raising money through initial coin offerings, or ICOs.
The total value of all cryptocurrencies on Aug. 18, 2021, was more than $1.9 trillion — down from April’s high of $2.2 trillion, according to CoinMarketCap. The entire value of all bitcoins, the most famous digital currency, was secured at about $849 billion, regaining some ground from recent price lows. However, the market value of bitcoin is down from April’s high of $1.2 trillion.
Best cryptocurrencies by market capitalization
These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap, a cryptocurrency data, and analytics provider.
|Binance Coin||$71.1 billion|
|USD Coin||$32.9 billion|
Data current as of Oct. 8, 2021.
Why are Cryptocurrencies so Famous?
Cryptocurrencies appeal to their supporters for a variety of reasons. Here are some of the most popular:
- Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to purchase them now, presumably before they become more important
- Some followers like the fact that cryptocurrency removes central banks from controlling the cash supply since over time these banks tend to decrease the value of money via inflation
- Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more protected than traditional cash systems
- Some speculators like cryptocurrencies because they were going up in value and have no interest in the currencies’ long-term agreement as a way to move cash.
How Do I Buy Just Crypto?
While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency.
To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. Here’s more on how to invest in Bitcoin.
Coinbase is one famous cryptocurrency trading exchange where you can create both a wallet and purchase and sell Bitcoin and other cryptocurrencies. Also, a growing number of online brokers offer cryptocurrencies, such as eToro, Tradestation, and Sofi Active Investing. Robinhood offers free cryptocurrency trades (Robinhood Crypto is available in most, but not all, U.S. states).
Are cryptocurrencies legal?
There’s no question that they were legal in the United States, though China has basically forbidden their use, and ultimately whether they’re legal depends on each country. Also, be sure to consider how to protect yourself from fraudsters who see cryptocurrencies as an opportunity to bilk investors. As always, buyer beware.
How do I protect myself?
If you were looking to purchase a cryptocurrency in an ICO, read the fine print in the corporation’s scheme for this information:
- Who owns the corporation? An identifiable and well-known owner is a positive sign.
- Are there other major investors who are investing in it? It’s a good sign if other well-known investors want a piece of the currency.
- Will you own a stake in the company or just currency or tokens? This distinction is important. Owning a stake means you get to participate in its earnings (you’re an owner) while purchasing tokens easily means you’re entitled to use them, like chips in a casino.
- Is the currency already developed, or is the corporation looking to raise money to develop it? The further along with the product, the less risky it is.
It can take a lot of work to comb through a prospectus; the more detail it has, the better your chances it’s legitimate. But even legitimacy doesn’t mean the currency will succeed. That’s an entirely separate question, and that requires a lot of market savvy.
But beyond those concerns, just having cryptocurrency exposes you to the risk of theft, as hackers try to penetrate the computer networks that maintain your assets. One high-profile exchange declared bankruptcy in 2014 after hackers stole hundreds of millions of dollars in bitcoins. Those aren’t typical risks for investing in stocks and funds on major U.S. exchanges.
Should you buy cryptocurrency?
Cryptocurrency is an incredibly speculative and volatile buy. Stock trading of organized organizations is generally less unsafe than investing in cryptocurrencies such as Bitcoin.
Cryptocurrencies work using a technology called a blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions.
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