(Newswire.net — February 8, 2018) — Bitcoin seems to be the financial buzzword of the moment.From the cryptocurrency reaching record highs and dipping to new lows, to banks banning customers from investing in it using credit cards, it’s never out of the news. It’s not the only cryptocurrency available though, with Ripple, Ethereum and more all gaining more traction and coverage from the financial press. Before investing in anything a decent understanding is required and the same is true for any cryptocurrency.
1. What is a Cryptocurrency?
A cryptocurrency is simply a digital currency that uses cryptography to keep it secure and private. Built on a decentralised peer-to-peer network, it was from this that the cryptocurrencies developed, as Bitcoin started out as an attempt to invent a peer-to-peer electronic cash system.There is no central entity, but transactions are made using blockchain technology. Cryptocurrencies hold no intrinsic value or physical form either.
2. How do I Invest?
You can invest in bitcoin through ADSS but should think of it as more like speculating than investing. The majority of people investing in bitcoin have no intention to spend them (and there are few places where you can), instead it is more of a speculation that they will become more legitimate in the future. There is no central bank where you can buy cryptocurrencies either, instead they have to be mined or bought off other people.
3. Can I Deal with the Volatility?
As has already been shown in the dramatic highs and lows for bitcoin, cryptocurrencies are extremely volatile. This is due to all sorts of trends and the fact that trading occurs over various cryptocurrency exchanges rather than one central exchange, so you’ll need to be able to deal with the volatility to succeed.
4. Is it Secure?
Cryptocurrency trading is designed to be secure yet there is still a risk of theft. That’s why it’s important you use secure wallet software to minimise the risk of theft and keep your cryptocurrency safe. Strong passwords and using reliable sources will help.
5. What Taxes are Required?
None! As cryptocurrencies are not the national currency for any country and is yet to be officially realised as an investment, there are no taxes on capital gains. When one rises in value you can cash out without having to lose a large chunk to the taxman, just one big benefit of cryptocurrencies.
With a greater understanding of the important points surrounding cryptocurrencies, you should be better placed to begin investing.