Cryptocurrency’s been blowing up for the last few years! In fact, cryptocurrency has been having its “;,” despite having already been popular for a number of years. Cryptocurrency is even starting to become a major part of major corporations’ emerging business models, like Twitter or Tesla.
As cryptocurrency continues to generate buzz and headlines, it raises an interesting question. Is cryptocurrency real money?
Keep reading to find out what you need to know about how cryptocurrency works and if it’s a good fit for your investment portfolio.
Is Cryptocurrency Real Money? An Investigation
You need to understand a bit about how cryptocurrency works. This will help you better understand the cryptocurrency vs real money uncertainty.
To invest in cryptocurrencies like Bitcoin or Ethereum, you have to “buy in.” You trade in “real money,” which is known as fiat currency in the industry, and you’re given a number of “tokens,” based on that currency’s going rate.
You can then sell that token to another investor or cash out.
Even with this rudimentary description, you can see that cryptocurrency is somewhere between having stock in a company and a currency in-and-of-itself.
It also should be enough to put the “cryptocurrency is not real money” detractors to rest. There are even dedicated cryptocurrency ATMs like Byte Federal.
You can even buy things with cryptocurrency directly, either. New York City luxury retailers Fancy.com accept cryptocurrency payments for everything from designer handbags to upscale furnishings.
Cryptocurrency Best Practices
Earlier, we compared cryptocurrencies to stocks. While that analogy is not exact, it’s still useful to help illustrate a few other things about investing in cryptocurrency.
Most notably, cashing out your cryptocurrency wallet takes time and costs money.
Converting cryptocurrency into real money costs a fee for each transaction. The fees for each transaction are usually negligible but they can add up. This is particularly true if you’re dealing in large quantities of cryptocurrency.
The time it takes to process a transaction, combined with the transaction fees, create some unique challenges if you’re investing in cryptocurrency for profit.
Cryptocurrencies can be particularly volatile. Prices can swing wildly in a given day, which is less likely on more established registers like stock exchanges. This means that if one of your crypto holdings gets particularly valuable, it is in your best interest to trade off as much as you’re comfortable with in a single transaction.
This way, you’re paying less in fees and you’re more able to capture the peak profits.
Like any form of investing, cryptocurrencies are full of opportunities when you know what you’re doing. Now that you know a bit more about how cryptocurrencies work and have a few best practices to guide you, you’re free to check out this blossoming new technology for yourself! Happy investing!
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