The layman’s guide to cryptocurrency
The exchange of bitcoins and other cryptocurrencies is made safe by unbreakable cryptography and algorithms which are continually updated every time a transaction takes place. Bitcoin, Ethereum, Litecoin and other cryptocurrencies have seen incredible returns in short periods of time, prompting never before seen levels of interest.
For example, a single bitcoin was valued at about $980 US dollars in January of 2017. Bitcoin hit $10,000 the last week of November in 2017. This means a meager $1,000 investment at the beginning of the year had grown to a paper value of $10,000 in a little more than 10 months. There are smaller, lesser-known crypto-money creations which have grown 10, 50 and even 100 times in value … virtually overnight. If you have heard any of these stories, you might be wondering what is required to invest in cryptocurrencies.
Why Cryptocurrencies as Opposed to Traditional Investment Vehicles?
Investing in cryptocurrencies is attractive for several reasons. First off, you don’t need to involve a lot of your hard-earned money. This is still a monetary platform of exchange which is not fully understood by most people. Because of this, the trust factor for cryptocurrencies, as opposed to traditional currency, is not nearly as high.
To combat this, cryptocurrencies are often available for small amounts of money. If you just have $100 to invest, you can get on board. This is attractive to the investor because very little money is at risk. The extreme volatility of these types of virtual currencies can multiply that $100 investment many times in just a few days or weeks, but that volatility can work against you as well.
One other attractive feature of cryptocurrencies appeals to those people tired of government corruption.
There is no centralized authority, person or persons that can manipulate the blockchain technology. This helps to stabilize and protects cryptocurrency transactions and balances. A public ledger is updated automatically and held by each person in a cryptocurrency market. In other words, no central authority can currently regulate or oversee cryptocurrency valuation and trading.
Many see this as the beginning of the end for traditional money systems. Just think what would happen to your investment if your cryptocurrency was chosen as the official monetary system of exchange for an entire country?
How to Get Started
To start with, you need to find a cryptocurrency marketplace. The following websites allow you to purchase and sell the top cryptocurrencies, funding your purchase with traditional money. You will use “regular” money to purchase bitcoins or some other type of virtual currency, and these currencies to purchase other virtual monies.
- CoinMarketCap
- CoinsBank
- CoinBase
- Poloniex
- Etoro
- BitTrex
- Kraken
- LocalBitCoins
Next, you want to get a crypto-wallet. Just as you would keep cash in a physical wallet, you are going to keep track of your cryptocurrencies in your virtual wallet. This means you track the private keys attached to your cryptocurrency, rather than having someone else take charge of your money. BreadWallet is a popular choice. You can alternately use the wallets automatically created by the exchanges you trade on.
Once you list some of your cryptocurrency balance with a particular exchange, it is ready for spending. You can also track the value of your cryptocurrencies there. When you have listed a bitcoin balance for purchasing, you are ready to trade. Just like with a traditional stock market, you will see different cryptocurrencies you can buy. You place a bid, and if that bid is accepted, congratulations, you are now an investor in cryptocurrencies.
It is highly recommended that you start with a very small amount of money to get used to the process. You can sell your cryptocurrencies on the above-listed exchanges as well, hopefully realizing a positive return on your investment.
By Janine Griffiths
