Cryptocurrency has become increasingly popular in the past few years. Hence, more and more people are investing or considering investing in it.
However, there’s much misinformation about cryptocurrency and whether it’s an intelligent decision to include it in your financial planning and retirement plan. And if you’re interested in learning the basics of cryptocurrency, it’s worth noting that there are both risks and benefits to investing in it.
Accordingly, if you’re interested in learning the basics of cryptocurrency, you may proceed to read further to learn everything you need to know as a beginner. In addition to that, if you’re wondering about taxes on cryptocurrency, consider reading this blog to help you understand how crypto is taxed in Canada.
What Is Cryptocurrency?
In essence, a cryptocurrency is a digital currency, also known as digital money, that doesn’t exist in physical forms like cash and coins. It only exists in virtual form and carries substantial value.
It can be stored in a ‘digital wallet’ on a computer or smartphone, and anyone who owns digital money can send it and buy things with it. In addition to that, there’s a form of cryptography called a blockchain that supports cryptocurrency.
Accordingly, blockchain is the technology that enables the functionality of cryptocurrency. It’s a decentralized system that records and organizes transactions across various computers. It’s distributed and replicated throughout the entire network. Hence, there isn’t one central bank or government entity that holds the cryptocurrency.
It’s also worth mentioning that the security of blockchain technology is one of the reasons cryptocurrency is popular among people who don’t want to have traditional bank accounts or don’t trust the banking or government. Although there are multiple legal reasons to own or invest in cryptocurrency, people also use it for illegal or suspicious activities.
Popular Cryptocurrencies
Bitcoin is the first, most popular, and most lucrative blockchain-based cryptocurrency. But keep in mind that there are a vast number of alternative cryptocurrencies out there apart from bitcoin. Each of those cryptos has its own set of features and conditions. While some are Bitcoin clones like altcoins, other currencies are created from scratch.
Accordingly, popular cryptocurrencies like Peercoin, Namecoin, Litecoin, and Ethereum are caused by Bitcoin’s success. Also, note that all cryptocurrencies’ entire value has reached USD$1.8 trillion, with Bitcoin accounting for about 46.5% of that total.
Is Cryptocurrency A Good Investment?
While the value of cryptocurrency may appreciate, many investors consider it speculative rather than a long-term investment. The reason is that cryptocurrency has no actual cash flow like a company, which grows in value over time through increased cash flow and profitability.
So, in order to benefit, others must pay more for digital money than you did. This investment hypothesis is known as the ‘greater fool’ investment.
Furthermore, although you can see significant returns on investment in cryptocurrency, you’re also likely to witness drastic drops in value. This volatility means that you should proceed with caution if you’re considering investing in cryptocurrency.
If you’re diversifying your portfolio, make sure that your cryptocurrency investment is relatively small compared to the overall size of your investment portfolio. That way, it’ll help you keep your portfolio protected from the cryptocurrency’s wild swings.
How To Buy Cryptocurrency In Canada?
Buying digital currency in Canada is a relatively simple process. If you’ve already created your account on a crypto exchange, the first step is to sign in to your crypto exchange account, then choose the brokerage’s option to purchase cryptocurrency. Make sure you’ve selected the digital currency you’d like to buy.
Different exchanges will support various currencies, so you should ensure that the platform supports the coins you’d like to purchase or invest in before creating an account.
After that, select how much you’d like to buy and ensure you have enough Canadian dollars or other fiat money deposited into your account. Next, considering the overall market trends at that time, make sure you’re comfortable with the cryptocurrency’s price as you preview your purchase. Then, click the ‘buy’ button to complete your purchase if all the details are correct.
Finally, after that, you can now store your digital currencies using the exchange’s wallet or transfer them to other software or hardware wallets.
Conclusion
Although cryptocurrency is getting more and more popular, it’s still a newborn medium of trade, store of value, and alternative investment. Most crypto traders are drawn to the volatile price swings that double overnight.
But remember, speculative trading has its advantages and disadvantages, and there are also some mistakes you need to avoid when investing in cryptocurrency. So, you should be careful because your crypto investment can lose its value quickly.
Ezekiel
Latest posts by Ezekiel (see all)
- Websites For Market Research - March 15, 2024
- Why Ethereum Is Becoming The Cryptocurrency Of Choice - March 15, 2024
- How to Use Your Internet Connection to Earn Effortlessly - December 5, 2022
