Everything you need to know about cryptocurrency.
This is probably one of the newest forms of passive income to date. As of now, the majority of people on the planet have no idea of what cryptocurrency really is. By now, they may have heard about it on the news but still have not yet grasped what a great investment tool it really is.
Like the stock market, investing in cryptocurrency comes with its own share of risks but if you’re careful about choosing profitable coins to invest in, you could generate quite a bit of income in the process. For instance, if you had invested $1000 in Bitcoin only a few years ago in 2013 and simply held onto it until now, those coins would now be worth at least six figures today.
But as exciting as cryptocurrency really is, it is also just as scary. You’ve heard about the recent rise in the price of Bitcoin, jumping nearly $16,000 in a matter of months only to see it plummet almost to the bottom in the same amount of time. Yes, this is a volatile market to get into. Those who choose to take this route are cautioned to do so very carefully. However, that doesn’t mean that cryptocurrency is a money trap. There are still quite a few opportunities to turn a profit in this new way of generating income. If you’re not brave enough to put your money in Bitcoin, there are more than enough alternative coins that could be worth considering as investment opportunities.
In its simplest of terms, cryptocurrency is digital money. It is money that exists only in the cyberworld. If you’re having difficulty wrapping your head around that, think of the automatic deposit of your paycheck. The money you work for goes straight from your employer to the bank. Often when you want to make a purchase, you make a transaction with either your bank card or a credit card. You don’t physically hand the money to the merchant.
This is digital currency. When you want to convert your digital currency into cash dollars, you go to a machine, insert the card, and request that the digital currency is exchanged for physical (or fiat) currency. The difference between this type of digital currency and cryptocurrency is in how it is stored. With the traditional digital currency that commonly is used for making purchases, who the money belongs to is stored on a central ledger usually managed by your financial institution.
All the data related to the currency is held in one place, which has presented problems for years. When it is held in this way, you don’t have control over your money, it is always at risk of cyberattacks, and there are a host of other problems that consumers have to deal with. However, with cryptocurrency, the data is stored on thousands of computer nodes set up all over the globe. Without one central network controlling everything, it is much more difficult to hack and you, the consumer, maintain control over all your money.
If you plan to invest in cryptocurrency, one of the first things you’ll have to come to understand is how this system works. You’ll need to develop your qualities of patience and resilience as you watch the market take you on a wild and crazy roller coaster ride before you begin to see returns on your investment.
Aside from the volatility of the market, there are other risks involved with cryptocurrency investments. If you’ve heard of cryptocurrency then you’ve heard the amazing story of Bitcoin. At one time, Bitcoin was worth less than a penny on the market but ten years later, that same coin was worth thousands. Many get into cryptocurrency hoping for that phenomenal success story to repeat itself.
To accomplish this, many other alternative coins (altcoins) were created in the hopes that they would build their own success story. Today these coins are offered at extremely low prices and people are literally throwing their money at them. The problem is that most of these coins don’t have any substantial backing and are merely hyped up scams that will, in time, peter out taking all your money with them.
It may take some time to do some research in order to find the more legitimate coins to invest in, so you’re not caught in the death trap with a coin that will send your money into oblivion. However, there are some coins that have already passed that questionable stage and have established themselves as legitimate profit-making coins well worth considering investing in. These coins are substantially lower in cost than Bitcoin but are already generating profit so aren’t as cheap as the newer coins.
Another risk you must consider carefully is the hidden fees. In order to buy these coins, you must purchase them on exchanges, many of which don’t post their fees, so you can find them easily. Your coin might make a nice profit but when you try to cash them out, your profits could easily be eaten up by these unexpected costs. Before you choose an exchange for trading your coins, make sure you find out about the fees you’ll be expected to pay for each transaction, so you don’t cash out until your profits are high enough to compensate for them.
Since you’ll be making all of your transactions online, it’s important to find out where these exchanges are located. We now live in a global community and you could be dealing with exchanges from all over the globe. Exchanges in certain countries may not have regulations that require them to protect your money, and if they close, they could take all your money with them.
One of the biggest risks of cryptocurrency is that it doesn’t work like other currencies that are backed up with things of value like gold or oil, but its value is based on how much the public is willing to pay for it. This means that there are plenty of reasons why the public could lose interest in the coin. However, as long as it has the ability to break free from the traditional fiat currencies, it’ll hold appeal for the average consumer, and the belief is that as more people come to understand it and how it works, the interest will only increase.
Many of these risks can be avoided by doing proper research before deciding to make a purchase. You need to understand what each coin is meant to do, study its whitepaper, and make sure you’re dealing with a quality and reputable exchange. If you can get past these riskier issues, there is a very good chance that you could generate quite a bit of money investing in cryptocurrency.
There are many benefits to be gained by investing in cryptocurrency. Slated as the next evolution in money, it is expected that one day the majority of people will do all of their buying and selling with these coins. By having them now when the prices are low, you can amass a great deal of wealth before they actually are adopted by the mainstream. Already, more and more merchants are willing to accept these coins as payment for their products and services.
In addition to getting ahead of the new trend, you also have the advantage of buying before government regulations step in and try to control it. Purchasing cryptocurrency is relatively easy and because it doesn’t have any government backing it is much easier to transfer funds across borders without having to pay the high fees required by financial institutions.
The volatility mentioned as a risk can also be viewed as a benefit. If you learn to work the market well, buy low and sell high, you can take advantage of the enormous price swings and earn an unbelievable amount of money in a very short period of time. Think about all those people who purchased Bitcoin early in 2017 when it was priced at around $1000 a coin. If they sold in December of the same year, they would’ve reaped around $18,000 in profit. No other industry can generate profitable income like that. If you can brave riding the volatile waves of cryptocurrency you could lose big, but you could also win really big.
One of the great things about cryptocurrency is that it is easy to get into. You don’t need to have a large sum of money to purchase and each coin is broken up into 100,000,000 smaller fractions of a coin called a satoshi. So, if you want to purchase Bitcoin (the most expensive coin) and you don’t have the thousands of dollars needed to buy one coin, you can invest whatever money you’ve into satoshis and accumulate them over time.
You can do the same with other alternative coins as well. So, rather than having to come up with $40,000 or $50,000 to invest in promising stocks, you could get started in cryptocurrency with as little as $10 if you wanted. Making a purchase on a weekly basis (called dollar cost averaging) you could eventually build up your portfolio into something that could in time turn into a very profitable venture.
A Wallet: One of the first things you’ll need to do before you make a purchase is to buy yourself a cryptocurrency wallet. This is very important. Since all cryptocurrencies exist only in the virtual world, you need a place to store your money. While you can establish a wallet online or with an exchange it is recommended that you have a personal wallet to store your digital coins.
There are several advantages to having a wallet. While the coins are traded on a decentralized server, many exchanges store your information on a centralized server, which leaves them open to hacking and other cybercrimes. By storing your currency in your private wallet, you protect your assets from potential theft.
Find an Exchange: After securing your wallet, you need to find an exchange to purchase your coins. There are several different exchanges where you can purchase your cryptocurrency, but you must be careful about choosing the right ones. Those that are set up in other countries may allow you to buy or sell through them, but their communication skills may be limited. So, if for some reason you need to discuss your account or other information with them, it’ll present a major problem.
Some of the most reputable exchanges are:
Exercise caution if someone offers to sell you their coins directly. While some of these trades are legitimate, some are not. It is best to purchase your coins through an exchange, at least until you’ve got a better understanding of the market and how cryptocurrency works.
Bitcoin is usually the first cryptocurrency purchase that everyone makes. If you plan to invest in other altcoins, it is generally best to make your first purchase with Bitcoin. Many other coins can only be purchased with Bitcoin, so you’ll have to start there anyway.
Once you’ve got yourself setup with some Bitcoin and a few altcoins, if you’re really feeling adventurous, you can start looking at investing in Initial Coin Offerings or ICOs. Most people view them like one would view initial public offerings of stock but there are some differences. When you purchase an IPO, you’re purchasing a stake in a real company, which entitles you to certain privileges. You gain by the increase in value in the company’s stocks and some stocks will pay you dividends. Depending on the kind of stock you purchase you may also have voting rights and other privileges.
When you purchase an ICO though, most of those privileges don’t exist. You’re investing in the technology behind a unique coin idea. In most cases, the coin hasn’t yet been introduced to the public, which comes with its own risks and benefits. The primary risk is that you’re putting your money into something that is not proven yet. It may never get off the ground and your money could easily be lost. On the other hand, if the coin gains some momentum and turns out to be a profitable venture, you could buy into an ICO at an incredibly low price. In many cases, one token could be less than a penny on the market. If it grows and gains a following you could capitalize on that and earn loads of money by getting in on the ground floor.
Right now, understanding the risks and benefits is very important when investing in cryptocurrency. It is definitely a profitable market to get into, but you need to accumulate as much knowledge as you can in order to make the most of it. Best advice is to only invest what you can afford to lose and nothing more. There is a lot to be made in cryptocurrencies, but the risks are very high. If you’ve got the stomach for it, this is something that has the potential to earn you a tremendous windfall, but it is not something for everyone. Do your research and then decide if it is the right decision for you.