Cryptocurrencies make it possible to transfer value online without a middleman like a bank or payment processor, and they do it globally, near-instantly, 24/7 and for very low fees. Bitcoin and its ilk are the best-known of these, but they’re not the only ones out there. And while eye-popping returns can attract investors, it’s important to consider everything involved in buying, selling or spending cryptocurrency. That includes knowing how it’s taxed, its legality and whether it’s actually a store of value or just another investing tool.
The first step to getting into crypto is finding a wallet to store your coins in. You can do that through a cryptocurrency exchange, which is a website or service that allows you to buy or sell digital currencies at current market prices, much like a stock exchange. Once you have a wallet, you need to set up a password and write down your seed words (a sequence of randomly generated numbers and letters). This is the backup you’ll need in case you lose access to your digital wallet or the exchange where you hold your crypto goes out of business. Store your seed words somewhere safe and secure—not on a computer, not on a cloud service, and certainly not on social media.
Once you have a wallet, you can use it to purchase things at merchants who accept it. That list is growing rapidly, and it now includes restaurants, hotels, online retailers and even airlines. The most popular items you can buy with crypto are electronics and luxury watches. But you can also use it to pay for travel or donate to nonprofits.
One of the challenges with crypto is that it’s not backed or guaranteed by any government or other entity. This makes it vulnerable to wild price fluctuations. Some people invest in it for the short-term returns, but there’s also speculation about its future as a global currency. This has pushed its prices up and down, often with dramatic spikes.
In order to protect against these extremes, stablecoins were developed to provide a more predictable value. These cryptos are pegged to existing currencies, such as the dollar, and most have a minimum of a dollar in reserve to avoid price volatility. This provides a level of stability that may appeal to investors who want to diversify their investments but are worried about the risks involved in other cryptocurrencies.
Cryptocurrency is still a new and evolving industry, so there are a lot of unknowns. But what’s clear is that it will continue to change the way we transact and how we think about money. It’s no wonder the tech press and finance industry are captivated by it. It could eventually become as common as cash, or it could fade away completely. But for now, it’s a fascinating and exciting experiment that’s changing the world in many unexpected ways. If you’re interested in learning more, you can find a lot of information on this topic by searching online.
