Cryptocurrencies allow you to purchase products and services, or trade them for profit. Here’s more information about cryptocurrencies, how to buy them and how to protect yourself.


1.    What is cryptocurrency?

A cryptocurrency is a form of payment that can be exchanged without the need for a central monetary authority such as a government or a bank. Instead, these tasks are broadly distributed among a cryptocurrency’s users via the internet.

Cryptocurrencies can be traded for goods and services, though they are often used as investment vehicles. While cryptocurrency is a great asset class, purchasing it can be risky as you must take on a fair amount of research to fully understand how each of them works.

The most popular cryptocurrency, Bitcoin had hit an all-time high of $68000 in 2021 before falling down again.

2.    How to invest in cryptocurrency?

Cryptocurrency can be purchased on peer-to-peer networks and cryptocurrency exchanges, such as Coinbase and Binance. Keep your eyes open for fees, as some of these exchanges charge what can be prohibitively high costs on small crypto purchases. Coinbase, for example, charges a fee of 0.5% of your purchase plus a flat fee of $0.99 to $2.99 depending on the volume of your transaction.

While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with USDT or another cryptocurrency.

3.    Are cryptocurrencies a good investment?

Cryptocurrencies are a good investment for those who can speculate the future movements of the market. So, if you can tell where the market can go after a news release or you can read the market’s price chart and see where it is headed, it can be a great investment opportunity, since cryptocurrencies are highly volatile.

Cryptocurrencies may go up in value, due to supply and demand, but many investors see them as mere speculations, not real investments. The reason? Just like real currencies, cryptocurrencies generate no cash flow. So, for you to profit, someone has to pay more for the currency than you did.

That’s what’s called “the greater fool” theory of investment. Compare that to a real business, which increases its value over time by growing the profitability and cash flow of the business.

Therefore, you should treat cryptocurrencies as a speculative market, and plan your investments based on this idea.

4.    How do I protect myself?

·         If you are looking to buy cryptocurrency in an ICO, read the fine print in the company’s prospectus for this information:

·         Who owns the company? An identifiable and well-known owner is a positive sign.

·         Are there other major investors who are investing in it? It’s a good sign if other well-known investors want a piece of the currency.

·         Will you own a stake in the company or just currency or tokens? This distinction is important. Owning a stake means you get to participate in its earnings (you’re an owner), while buying tokens simply means you’re entitled to use them, like chips in a casino.

·         Is the currency already developed, or is the company looking to raise money to develop it? The further along the product, the less risky it is.

It can take a lot of work to comb through a prospectus; the more detail it has, the better your chances it’s legitimate. But even legitimacy doesn’t mean the currency will succeed. That’s an entirely separate question, and that requires a lot of market savvy.