This article is brought to you by Bankrate and is produced by In The Know’s Commerce team. If you choose to purchase products through the links below, we may receive a commission. Prices and availability are subject to change.
Does it feel like everyone is talking about cryptocurrency right now? Yes sir. Do you have any idea what they’re talking about? If you’re being honest, chances are, it probably isn’t.
But that’s okay, because it’s never too late to study. While the cryptocurrency has certainly grown in popularity in recent years, it is still pretty new and there are still plenty of opportunities for newbies to get involved and get involved.
To help you get started with some crypto basics, read on below for the answers to two critical questions: What is cryptocurrency and should you have any?
What is cryptocurrency?
Let’s start with the popular phrase spoken in classrooms around the world: There are no stupid questions. So if you are wondering, “is crypto something like a real thing that I can touch and hold?” Don’t be ashamed. It’s a fair question. Just so everyone is clear, cryptocurrency isn’t money to hold in your hand like a dollar or a quarter. Rather, it is a fully digital form of currency that you can track if you have an account with an online platform or broker that offers cryptocurrency trading.
Now let’s look at some of the different types of cryptocurrencies. “The two most popular types of crypto are Bitcoin and Ethereum,” said Brian Baker, an investment reporter at Bankrate. “There are plenty of others too, like Tether, Cardano, and even Dogecoin, who started out as a joke,” he adds.
Bitcoin likely stands out from this list. That’s because it was one of the first cryptocurrencies introduced and is one of the most popular today. “One of the reasons Bitcoin has received so much attention is that the price has increased tremendously. Every time that happens, it’s going to get a lot of attention, ”explains Baker.
The story goes on
Given that crypto is completely virtual, you might be wondering how and where to use it. And that’s another valid question. However, what may surprise you, considering how much is talked about crypto, is that you can’t really use it in many places. “In terms of the use or acceptance of cryptocurrencies, it’s really quite limited right now. Very few places today accept crypto as a form of payment, ”says Baker.
Bakers goes on to say that many governments are skeptical of cryptocurrency, in part because of its association with illegal activities. Because of this, it’s not all that likely that cryptocurrency will replace traditional payment methods anytime soon.
Check out the best places to buy and sell cryptocurrencies here.
However, crypto is currently a very popular investment approach. “For a lot of people, crypto is a trading tool,” explains Baker. “There has been a huge increase in the price of Bitcoin and other cryptocurrencies. People see that the price is going up and they think it will keep going up. “
Technically, you are not investing when you are trading Bitcoin or any other cryptocurrency. “People who are not yet familiar with it should understand that Bitcoin and other cryptocurrencies have no intrinsic value, that is, they do not produce anything. When you buy them, you hope the price will keep going up, and that’s really not an investment, that’s speculation, ”explains Baker. “When you buy a stock, these companies have underlying profits and those profits will increase over time, which helps the stock’s performance over time. You don’t have that with cryptocurrency. “
Do you need cryptocurrency?
Now that you have a clearer picture of what crypto is and how it’s used, you may be wondering if you need cryptocurrency.
The short and easiest answer? No, you probably don’t need cryptocurrency right now. According to Baker, “most people are fine not owning cryptocurrencies and should stick with traditional investments like stocks and bonds.”
This is especially true when you are currently unable to take major risks with your money. “If you’re someone who’s risk averse and the most important thing is making sure your money is there when you reach for it, I wouldn’t recommend crypto at all,” says Baker.
On the other hand, if you have money to play with, can afford speculation, and are interested in crypto, go for it. Still, Baker recommends keeping crypto as a small percentage of your total portfolio. He also warns that whenever you are into crypto you should always be prepared for the possibility that you could lose your investment.
If you understand the risks and are still interested in exploring the world of cryptocurrency, here are some online brokers to try when you’re ready to get started:
Coin base. This platform specializes in crypto trading and allows users to buy more than 30 different types of cryptocurrencies.
Robin Hood. As another popular option, this online broker offers commission-free crypto trades, and you can also buy Bitcoin directly here.
Public. This platform offers royalty-free, publicly available investment options.
SOFI. This mobile-first platform offers both investment and banking options.
Do you still have questions about cryptocurrencies? Visit Bankrate.com to learn more.
The post OK, once and for all, what is crypto and should you have it? first appeared on In The Know.