<p>Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.</p><p><br></p>

What is Cryptocurrency?

<p>Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.</p>

What is blockchain ?

<p>More than 6,700 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on Feb. 18, 2021, was more than $1.6 trillion, according to CoinMarketCap, and the total value of all bitcoins, the most popular digital currency, was pegged at about $969.6billion. (You can check the<a href="https://www.nerdwallet.com/article/investing/how-to-invest-in-bitcoin"> current price to buy Bitcoin here</a>.)</p>

How many cryptocurrencies are there? What are they worth?

<p>These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap, a cryptocurrency data and analytics provider.</p>

Best cryptocurrencies by market capitalization

<p>Some of the reasons:</p><ul><li>Some see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable</li><li>Some like the fact that cryptocurrency removes central banks from managing the money supply since over time these banks tend to reduce the value of money via inflation</li><li>Some like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems</li><li>Some see them going up in value and have no interest in the currencies’ long-term acceptance as a way to move money</li></ul><p><br></p>

Why are cryptocurrencies so popular?

<p>Cryptocurrencies may go up in value, but many investors see them as mere speculations, not real investments. The reason? Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did.</p><p>Cryptocurrency needs stability and Bitcoins price volatility creates a conundrum.</p><p>If bitcoins might be worth a lot more in the future, people are less likely to spend and circulate them today, making them less viable as a currency. Why spend a bitcoin when it could be worth three times the value next year?</p>

Are cryptocurrencies a good investment?

<p>While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency.</p><p>To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum.</p>

How do I buy cryptocurrency?

<p>There’s no question that they’re legal in the United States, though China has essentially banned their use, and ultimately whether they’re legal depends on each individual country.</p>

Are cryptocurrencies legal?

<p>Cryptocurrency is an incredibly speculative and volatile buy. Stock trading of established companies is generally less risky than investing in cryptocurrencies such as Bitcoin.</p>

Should you buy cryptocurrency?

Crypto and NFT

<p>NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. </p>

<p>We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free. </p>

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What Is Cryptocurrency? Here’s What You Should Know

<p>Cryptocurrencies let you buy goods and services, or trade them for profit. Here's more about what cryptocurrency is, how to buy it and how to protect yourself. </p>

<ol><li><div><div><div><a><div><p><span>1. What is cryptocurrency? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>2. How many cryptocurrencies are there? What are they worth? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>Best cryptocurrencies by market capitalization </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><div><div><li><div><div><a><div><p><span>3. Why are cryptocurrencies so popular? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </li><li><div><div><a><div><p><span>4. Are cryptocurrencies a good investment? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </li><li><div><div><a><div><p><span>5. How do I buy cryptocurrency? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </li><li><div><div><a><div><p><span>6. Are cryptocurrencies legal? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </li><li><div><div><a><div><p><span>7. How do I protect myself? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </li><li><div><div><a><div><p><span><span>Should you buy cryptocurrency? </span> </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </li><li><div><div><a><div><p><span>What online brokers offer cryptocurrencies? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </li> </div> </div><div><button>Show More <svg><path> </path> </svg> </button> </div> </ol>

<ol><li><div><div><div><a><div><p><span>1. What is cryptocurrency? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>2. How many cryptocurrencies are there? What are they worth? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>Best cryptocurrencies by market capitalization </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>3. Why are cryptocurrencies so popular? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>4. Are cryptocurrencies a good investment? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>5. How do I buy cryptocurrency? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>6. Are cryptocurrencies legal? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>7. How do I protect myself? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span><span>Should you buy cryptocurrency? </span> </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li><li><div><div><div><a><div><p><span>What online brokers offer cryptocurrencies? </span> </p> </div> </a><div><span> </span><svg><path> </path> </svg> </div> </div> </div> </div> </li> </ol>

<p><span>A cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions. Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices skyward. </span> </p>

<p><span>Here are seven things to ask about cryptocurrency, and what to watch out for. </span> </p>

<p><span>Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service. </span> </p>

<p><span>Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security. </span> </p>

2. How many cryptocurrencies are there? What are they worth?

<p><span>More than 6,700 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on Feb. 18, 2021, was more than $1.6 trillion, according to CoinMarketCap, and the total value of all bitcoins, the most popular digital currency, was pegged at about $969.6billion. (You can check the </span><a href="https://www.nerdwallet.com/article/investing/how-to-invest-in-bitcoin"><span>current price to buy Bitcoin here </span> </a><span>.) </span> </p>

<p><span>These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap, a cryptocurrency data and analytics provider. </span> </p>

<p><span>Market Capitalization </span> </p>

<p><span><span>Data current as of Feb. 18, 2021. </span> </span> </p>

<p><span><span>» Learn more: </span> </span><span> </span><a href="https://www.nerdwallet.com/blog/investing/how-to-invest-in-bitcoin/"><span>How to invest in Bitcoin </span> </a> </p>

<p><span>Cryptocurrencies appeal to their supporters for a variety of reasons. Here are some of the most popular: </span> </p>

<ul><li><div><p><span>Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable </span> </p> </div> </li><li><div><p><span>Some supporters like the fact that cryptocurrency removes central banks from managing the money supply, since over time these banks tend to reduce the value of money via inflation </span> </p> </div> </li><li><div><p><span>Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems </span> </p> </div> </li><li><div><p><span>Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money </span> </p> </div> </li> </ul>

4. Are cryptocurrencies a good investment?

<p><span>Cryptocurrencies may go up in value, but many investors see them as mere speculations, not real investments. The reason? Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did. </span> </p>

<p><span>That’s what’s called “the greater fool” theory of investment. Contrast that to a well-managed business, which increases its value over time by growing the profitability and cash flow of the operation. </span> </p>

<p><span>As NerdWallet writers have noted, cryptocurrencies such as </span><a href="https://www.nerdwallet.com/blog/investing/is-bitcoin-safe/"><span>Bitcoin may not be that safe </span> </a><span>, and some notable voices in the investment community have advised would-be investors to steer clear of them. Of particular note, legendary investor Warren Buffett compared Bitcoin to paper checks: “It's a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money too. Are checks worth a whole lot of money? Just because they can transmit money?" </span> </p>

<p><span>For those who see cryptocurrencies such as Bitcoin as the currency of the future, it should be noted that a currency needs stability so that merchants and consumers can determine what a fair price is for goods. Bitcoin and other cryptocurrencies have been anything but stable through much of their history. For example, while Bitcoin traded at close to $20,000 in December 2017, its value then dropped to as low as about $3,200 a year later. By December 2020, it was trading at record levels again. </span> </p>

<p><span>This price volatility creates a conundrum. If bitcoins might be worth a lot more in the future, people are less likely to spend and circulate them today, making them less viable as a currency. Why spend a bitcoin when it could be worth three times the value next year? </span> </p>

<p><span>While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency. </span> </p>

<p><span>To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. Here's more on </span><a href="https://www.nerdwallet.com/blog/investing/how-to-invest-in-bitcoin/"><span>how to invest in Bitcoin </span> </a><span>. </span> </p>

<p><a href="https://www.nerdwallet.com/reviews/investing/brokers/coinbase"><span>Coinbase is one popular cryptocurrency trading exchange </span> </a><span>where you can create both a wallet and buy and sell Bitcoin and other cryptocurrencies. Also, a growing number of online brokers offer cryptocurrencies, such as </span><a href="https://www.nerdwallet.com/reviews/investing/brokers/etoro"><span>eToro </span> </a><span>, Tradestation and Sofi Active Investing. </span><a href="https://www.nerdwallet.com/reviews/investing/robinhood"><span>Robinhood </span> </a><span>offers free cryptocurrency trades (Robinhood Crypto is available in most, but not all, U.S. states). </span> </p>

<p><span>There’s no question that they’re legal in the United States, though China has essentially banned their use, and ultimately whether they’re legal depends on each individual country. Also be sure to consider how to protect yourself from fraudsters who see cryptocurrencies as an opportunity to bilk investors. As always, buyer beware. </span> </p>

<p><span>If you’re looking to buy a cryptocurrency in an ICO, read the fine print in the company’s prospectus for this information: </span> </p>

<ul><li><div><p><span>Who owns the company? An identifiable and well-known owner is a positive sign. </span> </p> </div> </li><li><div><p><span>Are there other major investors who are investing in it? It’s a good sign if other well-known investors want a piece of the currency. </span> </p> </div> </li><li><div><p><span>Will you own a stake in the company or just currency or tokens? This distinction is important. Owning a stake means you get to participate in its earnings (you’re an owner), while buying tokens simply means you're entitled to use them, like chips in a casino. </span> </p> </div> </li><li><div><p><span>Is the currency already developed, or is the company looking to raise money to develop it? The further along the product, the less risky it is. </span> </p> </div> </li> </ul>

<p><span>It can take a lot of work to comb through a prospectus; the more detail it has, the better your chances it’s legitimate. But even legitimacy doesn’t mean the currency will succeed. That’s an entirely separate question, and that requires a lot of market savvy. </span> </p>

<p><span>But beyond those concerns, just having cryptocurrency exposes you to the risk of theft, as hackers try to penetrate the computer networks that maintain your assets. One high-profile exchange declared bankruptcy in 2014 after hackers stole hundreds of millions of dollars in bitcoins. Those aren’t typical risks for investing in stocks and funds on major U.S. exchanges. </span> </p>

<p><span>Cryptocurrency is an incredibly speculative and volatile buy. Stock trading of established companies is generally less risky than investing in cryptocurrencies such as Bitcoin. </span> </p>

What online brokers offer cryptocurrencies?

<p><span>Of the online brokerages and cryptocurrency exchanges that NerdWallet reviews, the following current offer cryptocurrencies. </span> </p>

<p><span><span>Coinbase </span> </span> </p>

<p><span>Access to buy and sell more than 30 cryptocurrencies. </span> </p>

<p><a href="https://www.nerdwallet.com/reviews/investing/brokers/coinbase"><span>Read review </span> </a> </p>

<p><span><span>eToro </span> </span> </p>

<p><span>Trading platform with access to 15 cryptocurrencies. </span> </p>

<p><a href="https://www.nerdwallet.com/reviews/investing/brokers/etoro"><span>Read review </span> </a> </p>

<p><span><span>Robinhood </span> </span> </p>

<p><span>Seven cryptocurrencies including Bitcoin, Bitcoin Cash and Ethereum. </span> </p>

<p><a href="https://www.nerdwallet.com/reviews/investing/brokers/robinhood"><span>Read review </span> </a> </p>

<p><span><span>SoFi Active Investing </span> </span> </p>

<p><span>Offers three cryptocurrencies for trading: Bitcoin, Ethereum and Litecoin. </span> </p>

<p><a href="https://www.nerdwallet.com/reviews/investing/brokers/sofi-active-investing"><span>Read review </span> </a> </p>

<p><span><span>TradeStation </span> </span> </p>

<p><span>Offers trading for five cryptocurrencies, including Bitcoin, Bitcoin Cash and Ethereum. </span> </p>

<p><a href="https://www.nerdwallet.com/reviews/investing/brokers/tradestation"><span>Read review </span> </a> </p>

<p><span><span>Webull </span> </span> </p>

<p><span>Offers four cryptocurrencies for trading: Bitcoin, Bitcoin Cash, Ethereum and Litecoin. </span> </p>

<p><a href="https://www.nerdwallet.com/reviews/investing/brokers/webull"><span>Read review </span> </a> </p>

<p><span><span>Disclosure: The author held no positions in the aforementioned securities at the time of publication. </span> </span> </p>

Bite-sized knowledge
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your career

What Is Cryptocurrency? Beginners Guide to Digital Cash - NerdWallet

What is Cryptocurrency?

What is blockchain ?

How many cryptocurrencies are there? What are they worth?

Best cryptocurrencies by market capitalization

Why are cryptocurrencies so popular?

Are cryptocurrencies a good investment?

How do I buy cryptocurrency?

Are cryptocurrencies legal?

Should you buy cryptocurrency?

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Bite-sized knowledgeto upgradeyour career

What Is Cryptocurrency? Beginners Guide to Digital Cash - NerdWallet

What is Cryptocurrency?

What is blockchain ?

How many cryptocurrencies are there? What are they worth?

Best cryptocurrencies by market capitalization

Why are cryptocurrencies so popular?

Are cryptocurrencies a good investment?

How do I buy cryptocurrency?

Are cryptocurrencies legal?

Should you buy cryptocurrency?

IDEAS ABOUT

MORE LIKE THIS

Why Science Fiction Is the Most Important Genre | WIRED

Anxiety: Causes, Symptoms, Treatment, and More

What Is A Therapy Hangover? Here’s Why It's Common To Feel Exhausted After A Therapy Session

It's time to

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A PRO!

Bite-sized knowledge
to upgrade
your career