This is the fifth article in a series on the basics of crypto. You can find the first article on ‘What is crypto and what does it mean for me?’ here, and the previous article about Withdrawals, Wallets, and Deposits here.
We’ve gone through the theory, and now it’s time for the practical. But hold your horses - before you buy any crypto, you should always do your own research and understand all the features available to you. Remember when buying and selling crypto, your capital is at risk. Prices can go down as well as up. While we believe in crypto accessibility for all, we also know that it might not be appropriate for everyone. Please consider your personal circumstances when buying or selling crypto as the price can be very volatile. Past performance is not an indicator of future performance. Also remember that cryptocurrencies are not regulated.
With new tokens emerging every day, you may think you’re in early on the next Bitcoin or Ethereum when you buy an entire altcoin for as little as a few cents. But don’t get caught in unit bias - the idea that it’s better to have an entire token of one currency instead of a fraction of another. For any token that you’re looking to buy, it’s important to do your research, understand what you’re investing in, and where its potential may lie. It is also important to consider your personal risk appetite.
Price is not necessarily an indicator of value, which is why it’s important to consider other factors as well. Market capitalisation, or market cap is calculated by multiplying the total number of mined coins by the price of a single coin in a given moment. This changes as the token prices fluctuate, sometimes considerably within a short period of time. It can give an indication as to how popular the cryptocurrency may be compared against others, and also whether any price target you may have picked for this coin is realistic.
Another factor is the concept of fixed vs unlimited supply of available crypto, which is a hot topic for debate in the crypto community. Some coins have a fixed supply, like Bitcoin with its 21 million coin cap. On the other hand, Ethereum doesn’t have a fixed supply, although the rate of issuance has been reducing over time. This article does not aim to offer financial advice, but on a high level, some people believe that the scarcity of fixed supply creates an “inflation proof” currency which they believe is a valuable characteristic, similar to gold. Others believe being able to issue more coins is important if a particular coin is to become a viable alternative to fiat currencies, if that is it’s goal. Now, these are the two extremes of the argument, but there are pros and cons to both types of supply, and different coins and their associated characteristics make for different use cases. As always, we encourage you to do your own research and if not sure, to consult an independent financial advisor.
You may have felt disheartened seeing Bitcoin trading in the tens of thousands for a single coin and you only have $1, but don’t be. Just like fractional trading of shares, you can buy a fraction of a coin instead of a whole one. However, always remember that unlike investing in shares - buying cryptocurrencies is not regulated. With Revolut, you can buy as much or as little of your chosen crypto as you like starting from just $1. We’re not the only platform to offer this, but every exchange has a different minimum amount they require you to purchase, so always check you’re getting the best bang for your buck.
Within our app, you can find a feature called ‘Recurring Buy’, which helps to automate dollar cost averaging. If you’re unfamiliar with this term, it’s the process of buying a fixed amount of your chosen asset (crypto, in this case) in regular intervals. It’s important to remember that cryptocurrencies are highly volatile and the value of your investment may increase or decrease over time.
So whether you’re new to crypto or you’re just trying to understand the market a little better, we hope that we’ve given you some food for thought in this article. If your interest has been piqued, it’s a great time to take these basics and dive deep into more crypto learning - the internet is your oyster!
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