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Sep 30

A Comprehensive Guide To Investing In Cryptocurrency

Reading Time: 4 mins

Over the last few years, few investing options have taken the market by storm quite like cryptocurrency has. It seemed to come out of nowhere for most casual investors, with many people likely learning of its existence during its historical bullish run back at the end of 2017. With this of course came many questions for a lot of investors, both passive and active, innovative and traditional.

What is cryptocurrency? How does it work? What is a bitcoin? Can it be exchanged for goods? Is it viable in the long-term? These are all valid concerns investors should most definitely be asking before buying into an asset or in this case, a new form of currency so to speak.

If you’re thinking of investing in cryptocurrency, it would be wise of you to understand what you’re buying, as is the case with most investments. Aside from this overview, it’s important to find quality resources such as Coinformant that can help you along the way and provide valuable insights into this new evolving type of currency.

 

What Cryptocurrency Is, And What It Is Not

Cryptocurrency is a type of defi currency with a chance (not likely) to replace, or at least supplement, traditional centralized currencies as the value holder in transactions. Crypto is created via something called a blockchain, which is a process of verifying transactions and creating hashes to ultimately create new coins until the entire original amount (21 million for Bitcoin) is found. Insert some other fancy technical computer scientist words here, because its far more complex than that, but you need not know the finer details for investing purposes.

“Woah woah what, what the heck is defi?” Defi stands for decentralized finance, meaning that the currency is not controlled by any one entity or backed by anyone; and more cannot be created. The USD is a centralized dollar backed by the U.S. Government who can print more units whenever they wish, (as in the case of 2020 stimulus checks) whereas Bitcoin only has 21 million available to be mined forever, with only about 2.5 million remaining, barring any future extension stipulations.

That being said, cryptocurrency is not a replacement for the USD, Euro, Yuan, or any other internationally respected currency. At least, not as of yet. Some online retailers and on-site locations have begun to accept bitcoin as a form of payment, with about 15,000 total businesses and roughly 2,300 in the US accepting it. This is great news in terms of its viability as a currency.

What gives money any value is trust. Without trust and an understanding that a $20 bill is worth $20 to whomever you wish to spend it with, the green piece of paper or number in a bank account is useless. The same goes with crypto. If the trust is never built and private parties don’t use it as a store of value, it could never be a viable option, so the fact that it’s already crossing that important boundary is big.

 

How To Invest In Crypto

If you want to get started with investing in cryptocurrency, you’ll need to open an account with any number of exchanges to begin buying and selling. Many brokerages are now offering cryptocurrency trading as well, making it even more accessible to investors. Keep in mind that cryptocurrency is not associated with the SEC or regulated by FINRA, so there are no day-trading requirements or stipulations to worry about.

 

Crypto As An Asset

Aforementioned above, cryptocurrency, at the moment, could be classified as what’s known as an alternative investment. Much like gold in the sense that when the dollar loses value, people look to gold as a potential secondary fallback value holder, thus increasing the price in times of turmoil, cryptocurrency can also be viewed through this lens.

This makes it a valuable investment, especially when used for diversification or supplemental investments in an already broad or secure portfolio. The great news about this alternative investment is that it has a much higher potential than many others, with the off-chance that it becomes an alternative decentralized currency.

 

Speaking Of Alternatives, Don’t Forget Altcoins

When consumers and investors think of cryptocurrency, they often think of Bitcoin, and rightfully so. Bitcoin is the big-name player in the crypto industry, being the highest valued coin by far and topping $20,000 per coin in the aforementioned 2017 bull run. It isn’t the only viable investment though, even if it is one of the best.

An altcoin is exactly as it sounds, an alternative coin. Basically, it’s a secondary option to Bitcoin no matter how well-respected or established it is. Some well-known altcoins would be Ethereum, Litecoin, DASH, or EOS. The list could go on forever, with ICO’S (Initial coin offerings) from other established tech companies cropping up all the time.

Not all altcoins are initially accepted by major currency exchanges, and you may have to do some hunting if you’re really looking to buy into a new or rare one. That being said, those listed and those already established within currency exchange platforms can still be a quality secondary crypto investment. These coins present a more volatile option, with their chance for growth at times being dependent upon the underlying concept that they were created from.

Ethereum and other top altcoins are less risky options because of their well-established nature in the cryptocurrency world. They’re a good way to add depth and breadth to your cryptocurrency portfolio as a whole.

 

Here To Stay

It’s safe to say at this point that cryptocurrency isn’t going anywhere, and it’s here to stay. Whether it’s used as a currency alternative in the future, or even just as a secondary investment, the value that it has and will continue to have likely has some perpetuity and staying power to it.

Because of this, cryptocurrency is and will continue to be a very viable investment for those looking to expand their portfolio, or even seeking explosive gains within the next 1-10 years. Just go back a bit and watch the charts.

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