By now you probably have heard the term cryptocurrency either from your friends or all over the news. As complicated as it might sound, it is actually one of the best investments you can ever make. And similar to any other investment, people are always skeptical at first before making the bold move due to the endless questions they have as well as the fear of losing their money. In this article, we will be tackling some of the frequently asked questions about how to trade cryptocurrencies with an aim to clear any doubts that you might be having on the same;
1. What is a cryptocurrency?
A cryptocurrency is a form of digital assets that are used as a medium of exchange. It is nun on a peer to peer and decentralized monetary system. As such, it eliminates third parties such as banks. Some of the biggest cryptocurrencies include Bitcoin, Ethereum, Ripple, NEO, IOTA, and stellar.
2. Is it worth investing in cryptocurrency?
Like any other investment, it is never assured that you will get back your profits as expected. It is a risky deal. You have to have tolerance for risk and enough knowledge about cryptocurrencies before investing in them. Be very keen on finding out how the market is performing before making your investment. But in general, with proper analysis, it sure is a good investment.
3. How are cryptocurrencies purchased?
Well, as aforementioned, cryptocurrencies are digital monies meaning that you can purchase them either from sites or apps that allow the trade. The apps, otherwise known as digital wallets, enable you to buy the cryptocurrencies and send some funds to other traders with a lot of ease without the need of a third party. In a nutshell, you first create an account then you can use real money to buy the cryptocurrencies.
4. Are cryptocurrencies secure?
Cryptocurrencies use blockchain technology, which is a decentralized ledger that ensures all transactions are recorded accordingly making it hard for third parties to access your information. However, the fact that cryptocurrencies operate in the online space and is currently booming means that if not careful enough, you might get hacked too. Therefore, before trusting any site or app, ensure that you do thorough research and confirm that they are legit.
5. Are cryptocurrencies part of the regular stock exchange?
No, cryptocurrencies are not part of the regular stock exchange. As opposed to the traditional stock exchange where brokers were instrumental, cryptocurrencies do not involve third parties. Additionally, another main difference between the two is that when you invest in cryptocurrency, you invest in a currency that is entirely independent from the company whereas when investing in stocks, you invest in a company.
6. Are cryptocurrencies legal?
Well in most countries, cryptocurrencies are legal. Only a few countries like China have banned it. However, even as you look forward to investing in cryptocurrencies, beware of fraudsters in the market. Ensure that you read the details of the company and find out what other investors are saying about it.