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Cryptocurrency is no longer a novelty. From our social media feeds to Super Bowl commercials, digital currency is increasingly mainstream.
But some people remain hesitant about cryptocurrency because of its inherently risky and volatile nature.
In this guide, we’ll explain how to invest in cryptocurrency, including where to purchase digital coins and the safest way to store them. We’ll also dive into fundamental investing principles you should keep in mind to help manage your risk with this new asset class.
What Is Cryptocurrency?
Cryptocurrency is decentralized digital money created using computer networking software.
Most cryptocurrencies are based on blockchain technology.
Unlike traditional currencies — which are controlled by central banks — cryptocurrency doesn’t require a government or central authority to verify transactions.
You can use crypto to buy certain goods and services. You can transfer it back and forth to other users. Or you can buy and trade it like an investment.
Bitcoin is the oldest, most popular and most valuable cryptocurrency. It was created in 2008 and its share of the total cryptocurrency market was roughly 43% in 2021.
Still, the crypto universe is immense and complex. There are literally thousands of alternative cryptos — also known as altcoins — available to trade around the world, with a global crypto market cap of about $1.9 trillion.
Some cryptocurrencies are more about tech and less about investing: These cryptos are mostly designed to help run computer networks that carry out complex financial transactions.
Cryptocurrency is supported by blockchain technology, which operates a tamper-resistant record of all transactions ever made using that cryptocurrency.
Transactions are grouped together and recorded as “blocks” that are then linked together on a “chain” of cryptocurrency transactions.
Some cryptocurrencies are created through a process known as mining. There are two primary ways to…
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