Back to Basics with Cryptocurrencies

What is Cryptocurrency?

market cap cryptos

A cryptocurrency is a new digital asset class that uses strong cryptography to securely facilitate financial transactions, control the monetary supply, and verify the transfer of digital assets. Cryptocurrency can also be referred to as digital currency, virtual currency, crypto, tokens, or coins. The majority of cryptocurrencies operate in a decentralized manner on a technology called the blockchain which works as a distributed ledger. The first cryptocurrency to be widely adopted and considered as a new financial asset class among investors and traders is Bitcoin. Bitcoin was created in 2009 as an open source and decentralized cryptocurrency that was created by the unknown person, group or entity by the name of Satoshi Nakamoto.

Since Bitcoin’s inception, over 4000 cryptocurrencies have been created and they are referred to as altcoins (alternative coins). Many of these alternative cryptocurrencies have since died, while some of them grew to be very successful and have billions of dollars in market capitalization. In January of 2018, the total market capitalization of all cryptocurrencies combined surpassed $800 billion. To put this in perspective, the total market capitalization of cryptocurrencies was only $18 billion a year prior in January of 2017. Therefore, cryptocurrencies are most definitely a lucrative new asset class that investors from around the world are eager to be apart of.

How to Buy Cryptocurrency

The rise of cryptocurrencies has generated a great deal of interest from people all around the world as cryptocurrencies are a worldwide asset class with no borders. No matter who or where you are in the world, you can buy, sell, and trade cryptocurrencies with anyone from anywhere around the globe. So, how does someone go about acquiring cryptocurrency so that they can either spend it on goods and services, stash it away as an investment, or trade it on the global markets? Well, there are numerous ways to buy cryptocurrency which we will describe in detail below.

Cryptocurrency Exchange
Probably the best and most widely used method to buy cryptocurrencies is through a cryptocurrency exchange. There are numerous exchanges around the world that accept fiat currency deposits through various methods such as debit card and credit card, bank wire transfer and e-wallets. These exchanges accepting fiat currency allow users to fund their account with fiat currency and then place orders to buy various cryptocurrencies. Usually, the fiat currency to crypto pairs are limited to Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Litecoin (LTC), and some others. If someone wants to buy an altcoin which does not have a fiat currency pair, they will have to buy that crypto with either Bitcoin, Ethereum, or another compatible cryptocurrency pair.

Peer to Peer Marketplace
Another method used to buy cryptocurrencies, typically Bitcoin, is through a peer to peer marketplace. People can register to one of these marketplaces and interact with other users selling Bitcoin. They can agree on a price and choose to meet in person to make the transaction in cash or send the money to them via other means and receive Bitcoin.

Bitcoin ATM
Many major cities throughout North America, Asia, and Europe have Bitcoin ATMs located in malls, cafes, and stores. People can purchase Bitcoin from these ATMs with cash, debit cards or credit cards. Currently, Bitcoin is the only cryptocurrency available from these ATMs. However, there are some other cryptocurrency ATMs, but they are not very common. In order to use these ATMs, the user must already have a cryptocurrency wallet to deposit the crypto funds into.

How to Trade Cryptocurrency

Now that we know what cryptocurrency is and how to buy cryptocurrencies, how can we participate in the trading of this new financial asset class? The most common and primary method of trading cryptocurrency is via an online cryptocurrency exchange. As mentioned before, there are numerous cryptocurrency exchanges around the world in which traders can participate in the global cryptocurrency markets. These exchanges operate in a similar manner to traditional online trading brokerages as traders fund their accounts with their crypto assets and place various order types for buying and selling cryptocurrency. Depending on the exchange, traders have access to sophisticated charts where they can conduct in depth analysis with a variety of technical indicators and drawing and analysis tools. Some exchanges support the implementation of trading bots and the ability to trade on margin. Therefore, it’s much like trading forex, except unlike traditional markets, the cryptocurrency market operates 24/7, 365 days a year.

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