Cryptocurrency is more than just a buzzword. This new technology provides opportunities for growth and income on an unprecedented level. You may have a lot of questions about it, and that’s ok! We’re here to help. Crypto can be a great opportunity if you’re smart about it! Here, we’ll go over the top ten questions that investors have when starting with cryptocurrency.
1. What is cryptocurrency?
Cryptocurrency is a digital currency that is backed by cryptography. Theoretically, it is impossible to counterfeit or double spend. It’s a digital asset that’s based on a network that’s decentralized across many computers, which allows it to exist outside of a central government or authority. Cryptocurrency lets you trade on technology, instead of dealing with middlemen.
2. What are the basic elements of cryptocurrency that you need to understand?
To understand what cryptocurrency is at its most basic level, you need to understand what cryptography, blockchain, and currency are. Cryptography is the study of secure communication techniques. In this context, cryptography allows you to send and receive encrypted communication in a secure manner. In this case, that communication is money. It’s a communication tool that lets us communicate value. Cryptography is how this information stays secure.
Blockchain technology records information in a way that’s impossible to change, hack, or cheat. The chain records transactions across the network. It’s a form of distributed ledger technology.
Finally, currency is a faster way to communicate transactions. It’s important to remember that currency itself has no value, but that currency is how we communicate our dealings with money. Money is what actually acts as the place where value is stored.
3. Is crypto a fad or a bubble?
No. While some currencies might be a fad, the concept of cryptocurrency has a high enough rate of adoption to maintain its presence. Cryptocurrency is the fastest technology adoption we’ve ever seen— only the Internet and the automobile were adopted as widely, and those weren’t adopted nearly as quickly.
4. What problems does cryptocurrency solve?
Cryptocurrency solves one of the major problems with centralized monetary systems: the need for trust. All money systems operate on a system of trust, but we’ve seen that banks destabilize currency through loaning practices and that the system we have just isn’t trustworthy. The overhead of centralized banking operations costs a lot, and a peer-to-peer, decentralized store of value reduces this overhead. This means that cryptocurrency interactions are streamlined and don’t require the same fees or loan structure that traditional currency does.
5. How do you know if cryptocurrency is the right investment for you?
If you invest for immediate income, cryptocurrency might not be your ideal investment. But if you invest for growth, and are willing to stay in the game for at least 4 to 5 years in any particular cryptocurrency project, then it might be the right kind of investment for you.
6. How much should you invest in cryptocurrency?
All investing is a balance of risk and reward, so you should never invest any money you’re not ok with risking. You should know your “sleep number,” which is the amount you can invest before you start losing sleep over it. You can invest as little as you want or as much as you want, up to the level you feel safe at.
7. What do you need to start investing with cryptocurrency?
There are several things you need to get started.
- A secure email that you only use for cryptocurrency
- LastPass or another password manager for secure password generation
- An authenticator app or other two-factor authentication setup
- The exchange of your choice, like Coinbase (best for beginners) or KuCoin (has lower fees than Coinbase)
- A digital wallet, like Nexo
- An optional hardware wallet such as Trezor, which is like a single-use flash drive you can keep your entire crypto profile on
8. If you’re new to crypto, is it best to only invest in Bitcoin, or should you spread your investment out over various currencies?
This depends on what kind of trader you are. If you’re a day trader or swing trader, and you only hold onto investments for short amounts of time, you can be more adventurous. But if you prefer long-term holds, stick to currencies with a known cycle like Bitcoin and Etherium.
9. Can you move money out of crypto quickly and put it into safer investments?
Yes. If you can get it in, you can get it out. However, you should check with your platform to see if they have restrictions on how much you can pull out at once. You can also convert your crypto to a stable coin that tracks the US dollar, like USDC.
10. Once you invest in crypto, can you set notifications and sell/buy-at prices?
Yes. You can use your platform’s notification options. If you use several platforms, apps like Coinstats can connect to any platform and will notify you of price changes.
Getting the hang of crypto requires a little bit of time and effort, but the payouts are totally worth it. Follow along with The Rainmaker Family’s Bitcoin Course for Beginners to find out more about how to invest in this exciting new financial sphere!