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If all this made you interested in buying bitcoin or any other cryptocurrency, take some time to learn the ropes first. The industry is complex, and you can lose money fast. Though in recent years it's become much easier to invest in the industry, the long-term utility of bitcoin and its cohort of virtual tokens remains unproven.
The largest cryptocurrencies by market cap have taken a nosedive since their peak in November , underscoring the sharp volatility that's typical in cryptocurrency markets. Due to this unpredictability, here's a good rule of thumb: Don't invest more than you're ready to lose.
While buying bitcoin today can be as simple as logging into PayPal , where you buy cryptocurrency makes a difference. Some exchanges charge higher fees than others, and not every company selling crypto will transfer the assets to a crypto wallet under your own control. Instead, the company could hold it for you -- which may or may not be something you want. The two buying options for beginners are crypto exchanges, such as Coinbase, or money apps, such as PayPal or Venmo.
Exchanges require more know-how than money apps, but often charge lower fees and give you more control over your assets. If you don't want to take the time to learn about how to use a cryptocurrency exchange, you can just buy bitcoin on PayPal or Venmo.
Cryptocurrency exchanges generally provide more options than a money app. However, more isn't always better, as many of the lesser-known crypto assets are highly volatile and rife with scams. With money apps like PayPal and Venmo , you can choose to buy only a few cryptocurrencies, such as bitcoin and ether. These assets are definitely more acceptable investments in the arena of mainstream finance -- but remember that almost all crypto comes with significant risk.
When deciding between a money app and an exchange, consider the type of wallet that will store your cryptocurrency. Crypto wallets are kept secure through private keys -- usually a series of passwords. Money apps like PayPal generally keep your cryptocurrency in a "custodial" wallet, meaning the company controls the private keys that access it.
Exchanges often let you move your crypto to your own "noncustodial" wallet, giving you more control over your assets. The financial industry continues to search for ways to integrate crypto into conventional investments. If you want exposure to the cryptocurrency market without immediately buying bitcoin, you have a couple options. You can buy a bitcoin futures contract , which is an agreement to buy a set amount of bitcoin for a set price at a future date. You might also be able to buy into a few exchange-traded funds, or ETFs, that include bitcoin futures contracts.
And Fidelity, one of the largest asset managers in the world, recently filed to list their own bitcoin ETF, but the proposal was rejected by the SEC in January If you're interested, you could also invest in companies that are working with blockchain technology. Check out this article from CNET's Farnoosh Torabi for more ideas on ways to research the industry or get involved without necessarily buying in.
Every cryptocurrency exchange has its own protocols and rules, some more stringent than others. Several require you to verify your identity before buying and selling. Some enforce strict buying limits, while others will take any amount of money you're inclined to part with. All in all, cryptocurrency comes with risk for investors. Compared to more traditional investment assets, such as stocks or property, crypto is extremely volatile. If you sell cryptocurrency, you'll need to keep track of the amount, transaction date and other details because you'll need that information for filing taxes.
The environmental impact of bitcoin mining is also substantial. Most major exchanges require identification verification and sensitive financial information to establish and fund an account. Exchanges that are registered with regulators must confirm your identity before doing business in an effort to protect against fraud and money laundering.
If you plan to buy and sell bitcoin and other cryptocurrencies, expect to have to verify your identity. Timing a cryptocurrency buy can be a difficult if not treacherous thing to attempt since there are all kinds of elements that go into the price of a coin. Although there are fewer personality-based drivers such as sex scandals involving CEOs of major companies, for example , there are more lemming-like sell-offs. People have only so much tolerance for risk , and the fear of missing out on selling a crypto holding for a short-term profit is a tempting siren song.
With crypto, like with any kind of investment, your best bet will always be to hold on for the longer term , and buy a little bit at a time. Your highest returns will come from this strategy, even though it's not particularly sexy and doesn't provide any of that Vegas-like thrill for investors hoping for a quick winner. Discounted offers are only available to new members. Stock Advisor will renew at the then current list price.
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