What is a cryptocurrency?
A cryptocurrency is a decentralized digital payment system that enables smooth transaction of value, goods and services. What distinguishes cryptocurrencies from the fiat currencies like dollar, Euro etc, is decentralization and that’s the reason why it has zero tolerance on third party interference. One interesting feature of cryptocurrency as a medium of exchange is that, transactions are pseudo anonymous. Cryptocurrency leverages blockchain technology to gain decentralization, scalability, speed, security, immutability and efficiency. Blockchain is a public transaction database working as a distributed ledger for cryptocurrencies. Cryptocurrency popularly known in the community as “digital gold” is a store of value which means; it can be held as an asset, mined and exchanged.
Bitcoin, a leading cryptocurrency, has become a global phenomenon in financial transactions thereby enabling users to avoid steep fees charges by banks and other financial institutions. This write-up will not delve into the nitty-gritty of this but such information can be gotten from the web. Today, there are thousands of cryptocurrencies known as “Altcoins”. Some are almost clones of Bitcoin while others are forks or split from an existing cryptocurrency.
How many cryptocurrencies are there?
As at the time of compiling this report, we have more than 3000 cryptocurrencies and our website, Prices.org has detailed information on this.
What is a Blockchain?
Today, cryptocurrency is scaling to an enviable height courtesy of a technology known as “Blockchain”. The evolution of the blockchain technology was to create cryptocurrency such as Bitcoin but it finds its application meandering into other things as well.
Let’s get started, what is Blockchain? Blockchain is a decentralized technology spread across network of computers to manage and record transactions and not answerable to a single entity. Each of the blocks (i.e. block) are secure and bound by each other using cryptography to form a chain. One of the underlying benefits is security. Blockchain is open for everyone to see what is recorded to the ledger but cannot be altered. For you to alter, it has to be done across all blocks for validation.
Because it is efficient, secure, and hard to hack, blockchain technology is expanding to other industries. Soon, you will be able to record and track any type of transaction—from car titles to insurance contracts—on the blockchain.
What is an App Coin (Token)?
Cryptocurrency has become an innovative model that through the technology backing it, i.e. blockchain, you can create your own brand and issue your own “App coin” or Token.
Tokens are decentralized applications used in fueling various activities within and outside the ecosystem. You can call them “digital asset” because; everything in them creates value in running a cryptocurrency to a success. . For example, Storjcoin X (SJCX) is a token used to run Storj’s decentralized storage service. Token is a digital equivalent of a stock.
Tokens represent digital shares in the company, such as Lykke Coin (LKK).They empower the users to interact with its’ products while providing dividends via sharing of rewards and benefits to its shareholders.
How do I buy, sell, and store cryptocurrencies and tokens?
You can buy and sell cryptocurrencies and tokens on a cryptocurrency exchange, and store them in a cryptocurrency wallet.
To ease the bootstrapping process newbies usually struggle with in buying and selling cryptocurrencies, visit www.prices.org. We’ve created a list of several recommended exchanges and wallets. All you need to do, is to carefully study them to know the one that suites your needs and are within your catchment area.
While some cryptocurrencies like Bitcoin can be purchased with fiat currencies, some require, you purchase with Bitcoin or Ethereum.
What is the difference between a cryptocurrency exchange and a cryptocurrency wallet?
Many do not know the roles of these two and they end up making costly errors. A good number of cryptocurrency wallets and exchanges are managed by the same company.
In a simpler term, an exchange is where (website) you can buy and sell cryptocurrencies. A wallet is a software program that stores both your public and private keys which enables you to have full control of your digital assets. So, it’s a store house to your cryptocurrencies.
Cryptocurrency wallet gives you the opportunity to manage your digital assets, that’s to say, you’re in total control of your assets.
When you keep your money in cryptocurrency exchange account, you share control of your cryptocurrencies with the exchange itself.
It’s like keeping some of your hard earned money in your physical wallet right there in your pocket and keeping some in the bank. Which one do you have total control on? You might not have access to the one in the bank when you urgently need it and a limit is sometimes placed on withdrawals.
For security reasons, we recommend you hold most of your cryptocurrencies in a cold wallet rather than on an exchange account. You should only keep the amount of money you plan to use to purchase other cryptocurrencies in an exchange account.
Exchange account is more prone to hacking than the cryptocurrency wallet.
Our cryptocurrency wallet guide shows you our recommended wallet services and how to set them up.
Why do you recommend so many cryptocurrency services?
Cryptocurrency technology is all about cutting cost and making life better for its users.. We recommend many services to our readers to enable them buy and sell cryptocurrencies, invest and monitor their investments up to a profitable level. Remember, the industry is not fully regulated to be having one-stop-shop experience like the banks and brokerage firm. There are cryptocurrency services that make someone to be having steady profit from the arbitration, choose a cryptocurrency to invest or mine.
Until then, one needs to be flexible, not relying on just one service.
I have several different cryptocurrency exchanges and apps. How do I manage them all?
More innovative technologies are springing up every day to help someone handle some challenges being faced in the cryptocurrency industry. We understand, it can be a hassle overseeing several portfolios. Any cryptocurrency tracking tool such as “Altpocket” can solve your problem of managing cryptocurrency exchanges and apps.
When it comes to financial services, we’re used to having an all-in-one experience where banks or brokerage firms meet one’s services need. Cryptocurrency is tolling that direction of having one-stop shop experience and gradually, we will get there.
Manually, you can create a new folder on your browser and bookmark the cryptocurrency websites you use. Create a file, keep information such as usernames and passwords and encrypt it. To keep tabs on your portfolio, you can create an Excel spreadsheet and encrypt it too
Do you have to buy bitcoin to buy every other cryptocurrency?
In nearly all cases, you will need to buy bitcoin to purchase other cryptocurrencies. Bitcoin is the most supported and trusted cryptocurrency by every exchange. Other cryptocurrencies called Altcoins.
Bitcoin is the reserve currency of cryptocurrencies. All cryptocurrencies are priced in bitcoin and can be bought with bitcoin.
How can I purchase cryptocurrencies?
We recommend that you use the Gemini Exchange or Coinbase. Alternatively, you can also try Binance.com and Kucoin.com. You can check our list of exchanges in our site for more options.
Is there an easy way to find out the most up-to-date conversion rate for bitcoin to U.S. dollars?
Yes. You can use this https://prices.org/converter/ . Type in the amount of bitcoin and it will automatically calculate how much bitcoin is worth in U.S. dollars. In vice versa, you type the amount in the U.S. dollar box.
Can I buy bitcoin in other currencies other than the U.S. dollar?
Yes, you can make your purchases in fiat currencies like EURO, GBP, JPY and many more. LocalBitcoin provides you the platform to buy Bitcoin in any part of the world. Exchanges such as Kraken, Binance etc allow deposits in euros, yen, and Canadian dollars.
Can I buy cryptocurrencies or crypto tokens through my broker?
No. You can only buy cryptocurrencies and tokens on cryptocurrency exchange. Exchange companies give desired result with no hassle.
How much should I invest in cryptocurrencies?
For industry best practices, don’t allocate more 5% of your total net investable assets in cryptocurrencies. Don’t invest money you cannot afford to lose, remember, cryptocurrency market is volatile and have sent many into the murky waters of financial brokenness.
Remember: a small drop of water makes an ocean. It doesn’t take much to turn a small stake of $100, $500, or even $1,000 into life-changing wealth when invested in right coins on right time.
To spread the risk, do you recommend someone buy four or five cryptocurrencies?
It depends on how much you want to invest and your investment plan. We recommend you go for cryptocurrencies with good forecast and spend time to study their project and their roadmap. Not all cryptocurrencies are meant to be held or purchased for a longer period.
We suggest capping position sizes at $200–$400 per position for smaller investors and $500–$1,000 per position for larger investors.
Can you spend cryptocurrencies?
Yes. Bitcoin being the king of cryptocurrencies is globally accepted. Even, a coffee seller in the street accepts it More than 100,000 merchants accept bitcoin in some countries. Some merchants accept bitcoin directly from your wallet. We have Bitcoin ATM machine that can convert your Bitcoin to fiat currency for withdrawal.
There is software called PayBX that can enable you to spend Bitcoin and Ethereum in major online stores.
How are cryptocurrencies different from pump-and-dump Ponzi schemes?
Like any other investment (real estate, stocks, antiques, etc.), there is every tendency to come across a fraud scheme. Research every project, run away from any ICO that promises “guaranteed returns ‘on every investment. Go for tokens that have ground breaking utility and give investors a reason to hold onto them. In my experience, I spotted Bitconnect as a scam easily because I didn’t see features that convinced me, it’s a currency worth investing.
Putting hours of research into cryptocurrencies is worth engaging in the industry is full of junks. At https://prices.org/portfolio/ we have done the hard work for you in separating the chaff from the real. Please, explore it.
Why did bitcoin never become a stock?
Bitcoin is a currency, not a stock. When you, you invest in Bitcoin you invest in currency or the technology while in Stock, you invest in company.
How can I track daily cryptocurrency prices?
Prices.org is the one of the best websites for tracking daily prices, explore it.
What is the typical hold period for a cryptocurrency?
There’s no time frame. Well known cryptocurrencies such as Bitcoin and Ethereum give respectable profits when held long while that could not be said of lesser ones.
Satoshi Nakamoto would have worth 49.7billion if he still retains his Bitcoin, making him the 44th richest man in the world. That’s the beauty of holding cryptocurrencies like Bitcoin for a long time.
What are the risks involved with buying and holding cryptocurrencies?
The risk is that, the tendency to lose your money is high. From custodial point of view; one can easily forget his/her private keys or such information being hacked.
There are other risks involved. Exchanges can be hacked and all the currencies on the site stolen. Or a wallet provider could go out of business and the currency it holds could be lost.
It has pros and cons.
Can you leverage cryptocurrencies with options like the dollar?
Yes, you can leverage cryptocurrencies with options and futures services, but we don’t recommend using leverage. Leverage magnifies risks.
What advantages do cryptocurrencies have over physical gold?
Gold is an archetypal precious metal that has lots of limitations as highlighted below:
- It has limitations such as scalability, timely transactions and throughput. Cryptocurrencies have addressed these limitations.
- Inflations and high interest rates unlike cryptocurrencies.
- Government still manipulates and imposes certain unfavourable policies unlike the cryptocurrencies.
What’s to stop someone from creating unlimited cryptocurrencies?
Absolutely nothing, since creating unlimited fiat currencies is achievable; the same thing is applicable to cryptocurrencies.
What are the tax ramifications of investing in cryptocurrencies and profiting from this activity?
IRS rules on property taxation are also applicable to virtual currencies. Holding cryptocurrency assets for one year or less is a short term gain and can be taxed as ordinary income based on the person’s tax bracket. Holding cryptocurrencies more than one year is a long term gain and can be taxed at the rate of 0-20% according to the person’s net income.
Can one buy cryptocurrencies with a 401(k) or traditional or Roth IRA?
Yes, you can buy your cryptocurrency with a self-directed IRA or 401(k).Both IRA and 401(k) have tax advantage.
You can get more details from bitcoin IRA company site.
Are there any cryptocurrency exchange-traded funds (ETFs)?
ETF is growing popularity but it’s yet to take off. The reason for the delay is that, Bitcoin, the king of cryptocurrencies is yet to be fully regulated.
Are cryptocurrency gains/losses required on your annual tax return?
It depends on the region /country of taxation. In USA, IRS issues crypto tax guidance for all cryptocurrency tax related matters. One needs to consult a tax professional for more clarifications.
What is the risk of a government shutting down cryptocurrencies?
Cryptocurrency is a global currency, making it impossible to be shutdown. Government controls state/country, shutting down cryptocurrency activities in one region cannot affect its activities in other parts of the world. China is a good example where Government shutdown all cryptocurrency related activities and it didn’t affect cryptocurrency activities in other countries.
Holding cryptocurrencies in your digital wallet is the best way of avoiding any risk. Clamping down on cryptocurrency exchanges by government will not affect you.
Can banks flag your account if you transfer money to cryptocurrency exchanges?
Banks can only flag account on the premix that, illegal transactions such as money laundering are going on on the account.
One needs to consult his/her bank for clarifications, bearing in mind that policies and financial laws differ from country to country.
Despite we’ve had no reports from subscribers/visitors of this happening, it is recommended to consult about this subject with your bank in advance.