Cryptocurrency can be a lucrative investment if you are willing to accept the risk that it entails. It is a high-risk bet that could pay off, but there is also a chance that you will lose all your money. Cryptocurrency is a good investment if you want to gain direct exposure to the demand for digital currency. An alternative, albeit less profitable, option is to buy shares in companies with exposure to cryptocurrencies.
If you believe in blockchain technology, cryptocurrency is a great long-term investment. Bitcoin is seen as a store of value and some people think that it can replace gold in the future. It is the only leading crypto project that has an anonymous creator and is based solely on organic growth, which has made it the most meritocratic cryptocurrency on the market. When you first start out in the cryptocurrency world, it can be overwhelming due to the thousands of different cryptocurrencies available. To help you get your bearings, here are the top 10 cryptocurrencies by market capitalization: Bitcoin, Ethereum, Dogecoin, Tether, Binance Coin, XRP, USD Coin (USDC), Binance USD (BUSD), Cardano and Solana.
Tether and USD Coin are both stablecoins, meaning they are backed by fiat currencies such as US Dollars and Euro and hypothetically maintain a value equal to one of those denominations. This means that their value is supposed to be more consistent than other cryptocurrencies, making them attractive to investors who are wary of extreme volatility. Binance Coin is a form of cryptocurrency that you can use to trade and pay fees on Binance, one of the largest cryptocurrency exchanges in the world. XRP was created by some of the same founders of Ripple, a digital technology and payment processing company.
It can be used on that network to facilitate the exchange of different types of currency, including fiat currencies and other major cryptocurrencies. Cardano stands out for its early adoption of proof-of-stake validation. This method accelerates transaction time and reduces energy use and environmental impact by eliminating the competitive and troubleshooting aspect of transaction verification present on platforms such as Bitcoin. It also works like Ethereum to enable smart contracts and decentralized applications, which work with ADA, its native currency. Solana was developed to help drive the uses of decentralized finance (DeFi), decentralized applications (DApps) and smart contracts. It works with unique hybrid proof-of-stake and proof-of-history mechanisms that help you process transactions quickly and securely.
Its native token SOL powers the platform. Cryptocurrency is a form of currency that exists only in digital form. It can be used to pay for online purchases without going through an intermediary or held as an investment. Cryptocurrencies differ greatly from traditional investments such as stocks because when you buy shares, you are buying a share owned by a company which gives you certain rights such as voting on the direction of the company. If that company goes bankrupt, you may receive some compensation once its creditors have received payment of their liquidated assets. When buying and selling coins, it's important to pay attention to cryptocurrency tax rules.
Cryptocurrency is treated as a capital asset rather than cash so if you sell cryptocurrencies at a profit, you'll have to pay capital gains taxes. This is true even if you use your cryptocurrencies to pay for a purchase. Given the thousands of cryptocurrencies that exist (and their high volatility), it's best to take a diversified approach when investing in them in order to minimize risk. You can buy cryptocurrencies through cryptocurrency exchanges or brokerages such as WeBull or Robinhood. If you do your research and learn as much as possible about investing in cryptocurrencies, you should be able to manage investment risk as part of your overall portfolio. We always tell people that if they can't explain their investments to a 10-year-old, they don't have to invest in them.Kat Tretina is a freelance writer based in Orlando, FL who specializes in helping people finance their education and manage their debts.
Argent is a mobile cryptocurrency wallet for iOS and Android that allows its users to invest in different DeFi protocols.