Cryptocurrency is a newer addition to the investing market and has quickly expanded worldwide. It operates in a different way than traditional currency and investments. Before you invest, it’s important to know what the differences are when it comes to crypto vs. stocks.
Find out more about what cryptocurrency is, how to find new crypto coins, and more.
What Is Crypto?
Cryptocurrency, also known as crypto, is an entirely digital currency. At the most basic level, think of it as a new form of money, but instead of being in a physical form like a US dollar bill or a Chinese Yuan, crypto is a digital international currency.
While it is a currency that can be invested in and traded, crypto is very different from international currencies because it is not backed or regulated by any government or organization. Instead, it is a decentralized currency that has no regulation, oversight, or direct management.
This lack of regulation and control is a draw to some investors, but it also creates a risky and volatile market because there is nothing stopping a massive sell or crash of value.
For most cryptocurrencies, the only regulation and security come from a blockchain. Blockchains are organizations that ensure the integrity of cryptocurrency and are the single tool used in protecting the ownership and legitimacy of most cryptocurrencies.
How Is Crypto Different from Investing in Stocks?
One of the biggest differences between investing in cryptocurrency and stocks is the number of regulations. Stocks are only available through regulated channels and in regulated markets. This creates restrictions on who can invest and how they can make those investments.
Cryptocurrency has none of those restrictions. This creates a market where crypto can quickly change hands with no questions asked.
Another difference is what you are investing in. Stocks are an investment in a company, whereas crypto is an investment of ownership of a digital blockchain. This means stock values are directly related to the success or failure of a company and its products or goods, while cryptocurrency is valued by the basic supply and demand within the crypto market.
How Old Do You Have to Be to Buy Cryptocurrency?
Cryptocurrency is unregulated and officially has no age limit to buying or mining. Some established trading sites like Coinbase and Paypal require their users to be at least 18 years old, but that is only a requirement of those sites.
If you are underage and looking to buy cryptocurrency, make sure you look into regulations for the app you use. Many apps that have no age restriction are actually scams.
How Do You Find New Crypto Coins?
With the popularity of crypto growing, new crypto projects are continually starting. Some investors like to look for these new projects so they can invest small amounts in hopes of seeing large returns. Just imagine being able to invest in Bitcoin when it was only valued at a few dollars a coin.
The best way to find new crypto projects is to research social media sites like Reddit or Twitter. There are sites like CoinMarketCap that list some of the most recent crypto projects.
While it can be tempting to jump on the newest crypto coin and hope you’ll see big returns, this is a risky investment decision. As of this publication, there are over 15,000 different cryptocurrencies on the market, and there are even more that have failed. Blindly investing in a cryptocurrency just because it is new is like blindly investing in a company—there’s a chance of mismanagement, poor organization, and lack of structure to survive.
New crypto is a dangerous place to heavily invest in because there are a lot of ‘meme coins.’ These coins are created only to make fun of something or sucker in new investors. They are not intended to be a serious coin. There are a few rare situations where meme coins have broken into the major market, like Dogecoin, but most are designed to fail. Like any investment, you should always heavily research investment opportunities before making any serious investment.
Should I Invest in Crypto?
Ultimately, it depends on your comfort level with the volatility and risks associated with crypto. There is no such thing as a ‘sure deal’ or an absolute in investments, and you have to do the research to determine if you are comfortable with the risks associated with the investment.
Volatility
Cryptocurrency is a very volatile market. This means it has extreme ups and downs. In one day, it’s not uncommon for the most popular cryptocurrency, Bitcoin, to gain or lose $1,000 in value.
Sometimes that level of swing can come in only a few hours, with the price spiking and dipping multiple times throughout a day. Volatility isn’t always a bad thing, but if you’re not ready for the rollercoaster ride of price fluctuations, investing in such a volatile asset can be very unnerving and stressful.
Risk
Like any investment, there is no promise that you will make a certain percentage back from your investment, and there is always a risk that you will lose the money you chose to invest. Risk is an essential part of any investment, but if you are risk-averse, there are significantly less risky investments available.
If you do decide that crypto is right for you, it is generally a good idea to make sure you don’t invest all of your portfolio in crypto. A good investment portfolio is well-rounded and involved in multiple markets to help protect from a market or industry lowering in value.
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