Cryptocurrency is a way to transfer value online without the need for a middleman, such as a bank or payment processor. Instead, it uses a network of computers running free software to verify and manage transactions. This is called blockchain technology, which creates a digital record that’s immutable and transparent to all participants.
Bitcoin is the best-known cryptocurrency, but there are thousands of others. Each one has its own features and advantages, so you’ll need to research each one before investing. For example, some are designed to be fast and cheap to trade, while others focus on privacy or security.
The price of a cryptocurrency rises and falls, just like any other asset. The amount of money invested in a particular crypto can have a big impact on its value. But there are also other factors that can affect the price, including the number of buyers and sellers, regulatory developments and news events.
Many people buy and sell cryptocurrencies to make money. Others buy and hold them as an investment. Before you invest, consider your tolerance for risk and your long-term goals. And remember that the value of cryptocurrencies can change quickly and dramatically, so you may lose some or all of your investments.
It’s important to diversify your crypto investments. There are thousands of different cryptocurrencies, and some may be more profitable or easier to trade than others. Also, keep in mind that cryptocurrencies aren’t guaranteed or backed by any government or financial institution, so they can be more volatile than traditional investments.
You can buy and sell cryptocurrencies on exchanges, which are like stock markets for crypto. The exchanges provide web and mobile platforms where you can place buy or sell orders. The order types, minimum purchase and maximum sale amounts and fees vary by platform.
When buying and selling cryptocurrencies, there are potential transaction and trading fees. In addition, the Internal Revenue Service taxes crypto profits as capital gains or ordinary income, depending on how you use them and for how long you’ve held them.
If you have a large portfolio of cryptocurrencies, you might want to invest in a custodial service that stores your keys for you. This can help protect you from hacking and theft, and can offer faster and easier withdrawals if you need them.
Many companies now accept crypto as a form of payment. For example, you can pay for travel, food and even some insurance policies with Bitcoin. However, many companies still require you to use a credit or debit card. For these situations, you might want to consider using a crypto-backed payment card that’s linked to your wallet.