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Crypto

A cryptocurrency, also known as “crypto”, is a digital currency that can buy goods or services. However, it uses an online ledger with strong encryption to protect online transactions. These unregulated currencies are primarily used to trade for profit. Speculators can sometimes drive prices higher.


Bitcoin, the most popular cryptocurrency, has seen volatile price movements this year. It reached $65,000 in April and then lost nearly half of its value in May. The price of bitcoin rose rapidly in the fall. It reached an all-time high of $66,000, before it fell back. You can see the current bitcoin price here.

These are seven questions to ask about cryptocurrency and the things to be aware of.


1. What is crypto?


The cryptocurrency is an online payment system that can be used to exchange for goods or services. Many companies have their own currencies, sometimes called tokens. These can be used to trade for specific goods or services. These currencies can be thought of as casino chips or arcade tokens. To access the service or good, you will need to exchange cryptocurrency for real currency.

Blockchain technology is used to create cryptocurrencies. Blockchain is a distributed technology that records and manages transactions. This technology’s security is a major draw.


2. What are the number of cryptocurrencies? How much are they worth?


According to CoinMarketCap.com (a market research website), nearly 15,000 different cryptocurrencies can be traded publicly. The number of crypto is growing. After falling from a record high of $2.9 trillion just weeks earlier, the total value all crypto was approximately 2.6 trillion on December 3, 2021. The total value all bitcoins, which is the most widely used digital currency, was about $1.1 trillion.

The top cryptocurrencies based on market capitalization

These are the top 10 trading cryptocurrency by market capitalization, according to CoinMarketCap.

Cryptocurrency

Current data as of December 7, 2021.


3. Why are cryptocurrencies so in demand?

There are many reasons why cryptocurrencies are appealing to their supporters.

Bitcoin supporters see it as the currency for the future and are racing against the clock to purchase them, presumably before their value increases.

Many supporters love the fact that cryptocurrency eliminates central banks from managing money supply. Over time, these banks tend to decrease the value of money via inflation.

Others support the technology behind cryptocurrency, the blockchain. It’s decentralized processing, recording, and more secure than traditional payment methods.

Some speculators love cryptocurrencies, as they are rising in value. They don’t care about the currency’s long-term acceptance and use it to move money.


4. Are cryptocurrencies a good way to invest?


Although cryptocurrencies might rise in value, many investors view them as speculations and not investments. Why? The reason?

This is what’s known as “the greater fool theory” of investment. Contrast this with a well-managed company, which will increase its value over time through increased profitability and cash flow.

“Those who consider cryptocurrencies like bitcoin the currency of the future should remember that stability is a requirement for any currency.”

Many prominent voices within the investment community advise potential investors to avoid them. Warren Buffett, a legendary investor, compared bitcoin to paper checks. “It’s an effective way of sending money and it can be done anonymously and all that.” You can also send money by checking. Is a check worth a lot of money? They can send money, but that’s all they are worth.

If you see bitcoin and other cryptocurrencies as the currency of tomorrow, you should remember that currency must be stable so that consumers and merchants can decide what a fair price for goods. Through much of their history, Bitcoin and other cryptocurrency have not been stable. Bitcoin traded at close to $20,000 on December 2017, but its value dropped to $3,200 one year later. It was again trading at record levels by December 2020.

This volatility in price creates a problem. Bitcoins may be worth much more in the future. However, it is less likely that people will spend or circulate bitcoins today. This makes them less attractive as a currency. It is worth three times as much to spend bitcoins next year than it was last year.


5. How do I buy crypto?


Some cryptocurrencies, such as bitcoin, can be purchased with U.S. Dollars, but others require you to pay with bitcoins, or another crypto.

A “wallet” is an app that allows you to hold your cryptocurrency currency online. You create an account with an exchange to transfer money to purchase cryptocurrencies like bitcoin or Ethereum. Learn more about how to invest bitcoin.

Coinbase is a popular cryptocurrency trading platform where you can create a wallet, buy and sell bitcoins and other cryptocurrencies. A growing number of online brokers also offer cryptocurrencies such as eToro and Tradestation. Robinhood offers free cryptocurrency trading (Robinhood Crypto is not available in all U.S. States).


6. Are cryptocurrencies legal?


They are legal in the United States. However, China has effectively banned their use. Each country will ultimately decide if they are legal. Be sure to think about how you can protect yourself against fraudsters who use cryptocurrencies to scam investors. Buyer beware.


7. How do I protect myself?


For more information on how to purchase cryptocurrency in an ICO, please refer to the prospectus.

Who is the owner of the company? A positive sign is an identifiable and well-known owner.

Is there any other large investors interested in the currency? If other prominent investors are interested in the currency, it’s a good sign.

Do you want to own a stake or currency tokens or a percentage of the company? This distinction is crucial. This distinction is important.

Are the funds being raised to develop the currency or are they already developing the currency? The more advanced the product is, the lower its risk.

A prospectus can be time-consuming to read through. The more information you have, the greater your chances of it being legitimate. However, just because a currency is legitimate doesn’t guarantee it will succeed. This is a completely different question and requires market knowledge.

Beyond these concerns, cryptocurrency can expose you to theft as hackers attempt to hack into the networks that keep your assets. After hackers stole hundreds of million dollars worth of bitcoins, one high-profile exchange went bankrupt in 2014. These are not typical risks when investing in stocks or funds on major U.S. Exchanges.


Do you need to buy crypto?


Cryptocurrency can be a highly volatile and speculative investment. Stock trading in established companies is usually less risky than investing with cryptocurrencies like bitcoin.