Bitcoin is the cryptocurrency most people are familiar with but there are numerous others in the currency market. Investing in cryptocurrency is not unlike investing in gold bullion or silver.
What Is Cryptocurrency? Cryptocurrency is virtual or digital money that is created from computer code. Other than the lack of a physical representation, such as paper cash or metal coins, there are significant differences between cryptocurrency and electronic funds, or the recorded balances in a checking or savings account. Cryptocurrency is not distributed by, nor is there oversight from, governments. It is a peer-to-peer system, which means both parties have to agree to pay and be paid by the digital code. The code is encrypted. This is an important feature of cryptocurrency because only the sender or the receiver has a key or access to unscramble the code, as related by Computerworld.
Investing in Cryptocurrency Investing in cryptocurrency is not unlike investing in stocks. Stocks can be purchased from a brokerage exchange that participates in a stock market or stock exchange. Bitcoin can be purchased from a bitcoin exchange, of which there are multiple exchanges all over the world.
In the United States Coinbase is the best known but there are others including BitFinex, BitStamp and Gemini, as reported by Blockgeeks, a virtual knowledge platform that specializes in computer chain technologies. To buy other cryptocurrencies an investor would need to register at an altcoin exchange. The Cryptocurrency Market Capitalizations lists all crypto exchanges by volume. Like any other stock or bond purchase, there is always a risk. While cryptocurrency is forecast to become more profitable it is certainly not guaranteed. Blockgeeks warns that most new cryptocurrencies fail within their first few months of release and the established bitcoin has had wild fluctuations in its market performance.
Current Cryptocurrencies on the Market Bitcoin was the first alternative form of governmental currencies. But recently it has seen new challengers in the market space. Alternatives focus on privacy such as Zcash, Monero and Dash, while others use savvy contracting such as Etherum and Etherum Classic, and yet others focus on scaling payments such as Litecoin and Dash. Even more decentralized are new players such as Ripple, Nem and Bitshares.
A major issue with investing in the cryptocurrency is how to store the investment. There is risk in simply holding a cryptocurrency. There have been devastating and widespread computer hacks of exchanges, which have left cryptocurrency holders with significant financial losses. Blockgeeks recommends an investor use an exchange with a known level of trust such as Bitcoin.de in Europe.
There is a means to hold the alternative coins privately utilizing a variety of digital wallets, many available on a smartphone. A word of caution: Losing or damaging a phone could result in the loss of the cryptocurrency. If opting to store the investment individually, simple security steps can protect the investment such as making several backup copies on a thumb drive or printing out the online wallet private key and holding it in a lockbox or safety deposit box. Some wallets use seeds as a security feature. Seeds are a string of random words that can be printed out and used to retrieve lost items in the digital wallet.