Cryptocurrencies, like Bitcoin and Ethereum, are young forms of money that have unique properties. Since they exist only as digital records and don’t rely on physical tokens like dollar bills or gold coins, you can use them differently than traditional currencies. Here are four ways to think about cryptocurrencies.
Hold them and hope they increase in value
If you’re looking to buy and hold cryptocurrencies, there are two things that you should do:
- Buy low.
- Sell high.
It’s as simple as that. If you see a cryptocurrency that has gone down in value but has a lot of growth potential, it may be worth purchasing at the current price.
On the other hand, if you’ve already purchased a cryptocurrency and its value has gone up significantly since then, then selling now could yield some good returns on investment.
Spend them at stores that accept cryptocurrencies.
You can spend your cryptocurrency at many physical and online stores. However, you need to have a crypto wallet to buy anything with cryptocurrencies.
For instance, you can use your cryptocurrency for gift cards for travel, food, or entertainment at places like Starbucks, Google Play Store, and Ticketmaster.
Use them to buy goods and services online.
That is one of the most common ways that people use cryptocurrencies. There are many reasons why you may want to use virtual currencies to buy things:
- You can purchase goods or services that aren’t available in your country. For example, if no stores are selling a particular product near where you live, but they do exist elsewhere in the world, this gives you access to them without traveling.
- You can purchase goods or services unavailable in your local currency. If something costs more money than what’s on offer at home, it might make sense for someone with cryptocurrency holdings to convert those holdings into another nation’s legal tender. Then, they spend them as needed rather than save everything for later investment purposes only. It appeals, especially if there isn’t any reason why saving would necessarily yield better results.
Trade them on cryptocurrency exchanges
Cryptocurrency exchanges are websites that allow you to trade cryptocurrencies for other assets. They can be digital or physical.
Exchanges usually require you to create an account before you can trade. They want to keep track of your transactions and how much money you spend on buying and selling cryptocurrencies. Buying and selling a cryptocurrency typically involves going through an exchange first.
Once you have the amount in your account at this exchange, it’s time for trading! First, you’ll look at the order book on either side of where your order is placed.
If there’s enough volume there–meaning that many people want to buy or sell–then chances are good that your order will get filled immediately. However, if there isn’t enough volume, chances are good that it won’t get filled until after some time passes.
Cryptocurrencies are like other forms of money in some ways, but they also have unique properties.
Cryptocurrencies are not backed by any government. They aren’t controlled by any one person or group and they aren’t connected to any single country.
Cryptocurrencies are not regulated by any central authority, either. Instead, they exist on their own network (called a blockchain) that keeps track of every transaction made on the network.
We hope this article has helped you understand what cryptocurrencies are and how they work.
The best way to learn is by doing, so please explore these topics on your own.