Crypto is a form of digital money that uses encryption and blockchain technology to allow people to transfer value securely. It’s not backed by banks or governments and instead is managed by people worldwide using free, open-source software on computers and mobile devices. You can use it to send and receive payments instantly, around-the-clock, anywhere in the world for very low fees. It’s also a way to invest, without the need for currency exchanges or brokers.
Crypto investors typically buy and sell through a digital wallet that can be installed on a computer, smartphone or tablet. These wallets are secure and encrypted to keep your financial information private. You’ll need a unique key to access your crypto wallet, which you should only share with trusted people. Transaction fees for cryptocurrencies are very low, and many cost only pennies. This makes them an attractive investment option for anyone with internet access and a computer or smartphone.
When buying crypto, it’s important to consider its price volatility. The price of a cryptocurrency can rise and fall significantly, sometimes making it unprofitable to hold or trade. Prices are influenced by how much demand there is for a specific crypto, the supply of available coins and how useful people expect it to be in the future. Prices are also impacted by news about how companies plan to use crypto, events in the real world and how regulators view and legislate it.
Before you invest in crypto, it’s important to understand that you won’t be able to easily convert it back to cash. Crypto isn’t insured by the FDIC or the Securities Investor Protection Corporation, and it can be difficult to find a buyer for your crypto if you need to sell it. In addition, platforms that buy and sell crypto may be hacked or stop operating. Because of these risks, you should only invest in crypto with money you can afford to lose.
A key factor to consider is how widely a cryptocurrency is used. Look for metrics like the number of transactions on the network, and if there’s an established team behind it that’s known for their expertise in the space. It’s also a good idea to look at how many people are already investing in a particular crypto. You’ll want to be sure that reputable investors are willing to support it, as this can increase its value and stability.
There are some other things to think about before buying and holding crypto, such as its tax status. In the United States, you’ll need to report any gains on your crypto if you sell it for a profit or use it to pay for goods and services. You’ll also need to know how much you pay in transaction fees when purchasing goods and services with crypto, as these can add up over time. You should consult a tax professional before investing in crypto.