The average investor is well aware of terms like “cryptocurrency” and “Bitcoin,” but the majority of people are still on the outside looking in. They know it’s something potentially revolutionary, but that’s where their knowledge stops. It’s time that we finally demystify this topic and make it understandable for the masses.
What is Cryptocurrency?
The easiest explanation is that cryptocurrency is a digital form of currency that can be exchanged online in return for goods and services. The term “cryptocurrency” – or “crypto” for short – is lowercase. It’s a class of money, not a specific tender. However, within the crypto category, there are individual currencies, often called tokens.
Tokens have value and can be traded for specific goods. While there’s nothing physical to hold, you can think of it as a coin or casino chip. Tokens are stored and transmitted using a technology called blockchain. This is a decentralized digital technology that’s spread across thousands of computers and servers that manage, record, and verify transactions. It’s believed to be the most secure method of storing and recording on the planet.
While there are nearly 7,000 different cryptocurrencies currently being traded on public markets, there are really only a handful that are worth anything at the moment. The “big three” are Bitcoin, Ethereum, and Tether, with Bitcoin having nearly five-times the market capitalization of the next biggest coin.
The Appeal of Crypto and Bitcoin
While cryptocurrencies and tokens have been around in some capacity for over a decade, the buzz around them has increased substantially over the last four years (and most notably over the past 12 months). So it’s worth asking: What’s the appeal to supporters and investors?
- Proponents laud the fact that crypto removes central banks from managing the world’s money supply. This, combined with the fact that most tokens have a finite supply, eliminates the risk of inflation.
- The technology that underpins cryptocurrency (the blockchain) has an incredible opportunity in its own right. Working as a decentralized processing system, it has the potential to revolutionize dozens of industries.
- The secure nature of crypto draws many people in. Unlike other transactions that can be manipulated or disputed, blockchain creates a definitive record that can’t be altered in any shape or form. And yet, at the same time, it’s completely anonymous.
Crypto and Bitcoin are not without risk – but the same could be said of any other underlying security, including the U.S. Dollar (when you take inflation into account). When viewed through the lens of diversification, it’s something every investor should become more informed about.
Good Resources for Further Learning and Immersion
There’s a lot of information about cryptocurrency and Bitcoin on the internet. And if you aren’t careful, you can find yourself running down a rabbit hole of misinformation and misguided thoughts. So as you continued to seek out more knowledge on this interesting investment class, here are some trusted and reliable sources of information to pull from.
- Sophisticated Investor. As one of the most trusted online resources for investment news and insights, Sophisticated Investor has incredibly digestible and intuitive cryptocurrency education for both beginners and advanced investors alike.
- Udemy Bitcoin Courses. If you really want to understand Bitcoin and cryptocurrency in an in-depth manner, what better way to do it than by taking a course? Udemy has several good online options to choose from.
- The Bitcoin Knowledge Podcast. Prefer to learn via listening? There are plenty of good cryptocurrency podcasts available for streaming, but The Bitcoin Knowledge Podcast is one of the best for people who are looking to learn about what Bitcoin is, why it’s important, and the role it plays in the future of money and investing.
Hopefully these three resources give you enough information to sink your teeth into and learn the ins and outs of cryptocurrency and Bitcoin!
The Future is Here
For nearly a decade, supporters of cryptocurrency have sounded the alarm bells that tokens like Bitcoin are the way of the future. And as things stand at the moment, they appear to be on to something. But it’s important that every individual investor makes their own informed decisions. Never invest in something you don’t understand. Take the time to do your research before moving any money.