All The Cryptocurrency FAQs

In cryptocurrency terminology, the closest thing to a stock “split” would be called a “fork”.  Given this slight change in meaning, yes, cryptocurrency can split (i.e. forked). A split usually occurs when a new cryptocurrency is created based on an existing one and an investor can receive some coins in the new currency as well as retaining all of their previous currency. A good example is the bitcoin split which resulted in a new bitcoin currency called Bitcoin Cash (BCC). There have already been a dozen other splits off of the original bitcoin. Some of these splits have been total failures but others have been successful, such as the case with BCC. Other splits are not just unsuccessful, they can also be scams in order to enrich those to caused the split. If you hear that your coin has been split, then be careful about how you collect it since you could be robbed. Read our section on [understanding cryptocurrency Forks][] to learn more.

The simplest way to trade a cryptocurrency is to first buy it from a cryptocurrency exchange using fiat currency (cash). Then you can either sell it later at a profit (or loss). You can also trade your initial cryptocurrency for a different kind of cryptocurrency (like trading bitcoin for ether coins). Trading between currency types is also done on a cryptocurrency exchange. Some exchanges are intended primarily to trade between fiat currency and cryptocurrency, while other exchanges are intended primarily to trade only between various types of cryptocurrencies. Not all cryptocurrencies can be traded on all exchanges. Another method to trade cryptocurrency is to purchase a “Contract for Difference” (CFD). This method allows you to take long or short positions in cryptocurrency with a lower initial investment.

In short, yes, cryptocurrency can recover. The current digital era demand for a digital currency, established financial institutions adopting cryptocurrencies, regulations on cryptocurrency becoming inevitable, and the interests in cryptocurrency by institutional and retail investors are some of the reasons that contribute to cryptocurrencies likely recovery from any major price dips in the long-term. These factors together with individual interest and things like the recent lifting of the Facebook ban on crypto-advertising makes cryptocurrency recovery very likely.

Yes, cryptocurrency can make one rich. But it could also make one poor if poor choices are made. It depends on many factors, not the least of which is a person’s technical analysis and trade skills, as well as their timing of buying and selling currencies. Cryptocurrency trading can result in both huge gains, as well as huge loses. Furthermore, the price volatility of the cryptocurrencies can play a significant role in dictating the gains or losses.

In cryptocurrency terminology, the closest thing to a stock “split” would be called a “fork”.  Given this slight change in meaning, yes, cryptocurrency can split (i.e. forked). A split usually occurs when a new cryptocurrency is created based on an existing one and an investor can receive some coins in the new currency as well as retaining all of their previous currency. A good example is the bitcoin split which resulted in a new bitcoin currency called Bitcoin Cash (BCC). There have already been a dozen other splits off of the original bitcoin. Some of these splits have been total failures but others have been successful, such as the case with BCC. Other splits are not just unsuccessful, they can also be scams in order to enrich those to caused the split. If you hear that your coin has been split, then be careful about how you collect it since you could be robbed. Read our section on [understanding cryptocurrency Forks][] to learn more.

Yes, cryptocurrency can be converted and sold for cash (also called “fiat” currency) using an exchange service such as Coinbase. This is very common. Those exchanges allow one to convert their digital currency into fiat currencies, and then that fiat currency can be sent to a bank account. Other exchanges allow currency holders to sell the cryptocurrency to other cryptocurrency holders

Yes, cryptocurrency can be shorted. This can be done via a cryptocurrency margin trading platform. Different strategies can be used for this including betting, future and prediction markets, and margin trading. However, one needs to tread carefully as shorting is a risky activity and requires a good market understanding.

The price swings in the cryptocurrency market is a normal occurrence for many reasons. Rumors and news often play a big role in price swings. Recent developments such as the increased adoption of cryptocurrency and the underlying blockchain technology, regulations to reduce uncertainty and fraud, and the view of cryptocurrency as a safe investment are all indicators the cryptocurrency will probably bounce back.

In a majority of the countries, cryptocurrencies aren’t considered as securities, but this type of classification is still being debated and considered in most countries. Some counties, like the US and the UK, consider cryptocurrencies to be “property”, not securities. In other countries, such as Singapore and New Zealand, cryptocurrencies are categorized and considered to be securities. And still others have not decided on any tax classification at all yet.

The short answer is that it depends on your personal financial situation, your risk tolerance, as well as the cryptocurrency you choose to invest in. The cryptocurrency market is highly volatile and only has a few years of a track record on which to judge. There are many different types of cryptocurrency to invest in and it isn’t clear which one(s) will stand the test of time. It is possible that none of them will. On the other hand, the volatility in the short term can be a great advantage as one could make huge profit margins in a short period of time if you make exactly the right pick at exactly the right time. Profit can be made when the price of cryptocurrencies are going up and even when prices are going down.

In hindsight, it would appear that the huge spike in cryptocurrency prices at the end of 2017 was a bubble. As of the middle of 2018 prices have come way back down yet are still going through periods of extreme volatility. Is it still a bubble? No one really knows although many so-called experts claim that cryptocurrency is and will always be a bubble until it is dead. Markets whose prices go up at a wildly unpredictable pace and which are driven by rumors, fear, greed, and speculation, rather than fundamental value are often considered bubbles. So are cryptocurrencies still in a bubble? Many think so and it will continue to be a bubble until it reaches a “fair” value.

The answer is slightly different from the question “is it a GOOD investment”. It still depends on your personal financial situation, your risk tolerance, as well as the cryptocurrency you choose to invest in. The cryptocurrency market is highly volatile but if it is eventually adopted as a means of legal tender and savings by society and the world then it will probably turn out to be a very worthy investment in the long run. But until that time you risk losing all your money for various reasons.

For most cryptocurrencies, price changes can be tied to the concept of demand and supply. The price will normally fall when the demand by the traders is lower than the token supply, and rise when the demand is higher and the supply is limited. The usefulness of the token and the difficulty in mining affects the coins supply and demand, thus influencing the price changes. A difficult mining process limits the coin supply, thus increasing price pressure when the demand is high. The price will also change depending on the hype and human emotions which drive demand. Negative publicity leads to a decline in the cryptocurrency’s prices due to reduced demand, while a positive publicity results in a greater adoption, thus resulting in an increase in the prices. Previously we used the phrase “for most cryptocurrencies”, but there is also a type of token called a “stable” coin whose price is tied very closely to the value of some government-issued fiat currency. IN THEORY, the price of these types of currencies is super stable and never changes much. A currency called Tether is one single example of a stable coin tied to the US dollar.

Cryptocurrencies are very volatile and, as such, the decision on the cryptocurrency to purchase greatly depends on the risk the buyer is willing to take. Generally, the lower the market cap of a coin, the higher the volatility and the more the likelihood for higher returns – and higher losses. The mainstream coins such as bitcoin, bitcoin cash, and Ether, which are more stable, have a lower risk. Although they can be considered “safer” than less known coins, they also typically have lower returns. The smaller coins are riskier but their profits can be faster and bigger. You will need to do your own research to be sure that you buy a currency that makes sense for your own investing situation. To make a really intelligent decision you should find out who is the group behind the coin, read their white paper, and determine what makes their coin better than others. Remember that it is always possible that any cryptocurrency, including the big ones, COULD go to zero and you would lose all your money. There are 100s of small coins that have already lost over 95% of their value since they peaked. So choose with caution and knowledge.

Cryptocurrencies can be classified into two types: the major currencies (such as bitcoin and ether to name just two) and all the 100s of altcoins. The large price drops experienced by the major cryptocurrencies has led to the investors shifting their focus to the altcoins, leading to an increase in the rise of some altcoins. That is, the altcoins are increasing in usage and price. Some of the popular altcoins include Ripple, Stellar, Litecoin, Monero, Zcash, and Steem, among others. But the coin rising the most at any given time can be radically different from the coins which may be rising days or weeks later.

Just like with the dot-com bubble of the 1990s, it is difficult to determine which cryptocurrency will pop and which will flop. The cryptocurrency race has already seen many currencies come and go due to varied reasons while other currencies have withstood the test of time and are more likely to continue to win and become acceptable. Bitcoin may win the race as a store of wealth, just like gold, but may lose on the day-to-day transactions due to its relatively slow transaction speed. The cryptocurrency that will win on the day to day transactions front and become the de facto crypto cash must be well accepted by many people and stores, easy to transact with and liquid i.e. it should be easy to exchange with many buyers and sellers. Such coins could include Litecoin, Ethereum, IOTA, Bitcoin Cash (BTC), among others. However, it isn’t clear cut on the cryptocurrency that will win. There could be more than one winner depending on the way in which the currency is intended to be used.

Due to the volatile nature of the cryptocurrencies, one cannot say with certainty when cryptocurrencies will recover. The answer to this question is often based on speculations, which might be or not be true. However, the trend in cryptocurrency trading shows the potentiality for a rebound. The continued recognition of cryptocurrency by governments that previously banned the use of cryptocurrency and the efforts to establish regulation of cryptocurrencies will help in the recovery in cryptocurrencies. Furthermore, the continued growth of interest by banks will also help cryptocurrency to recover some day. As more people are beginning to understand the concept and cryptocurrency adoption for use in real life activities is on the rise. As such, it is just a matter of time before cryptocurrencies recover.

It is quite hard to predict the exact time when any particular coin will rise, nor what the reason for that rise will be. This is also true of the total cryptocurrency market as a whole. Just like the stock market, cryptocurrency market timing is very difficult to predict.  More often then not people lose out when trying to time the market. But we feel that over the long term, the value of cryptocurrencies will rise, but the road may be bumpy.

Make sure you first learn about any cryptocurrency you want to buy and also learn about how to keep it safe.

This really depends if you plan to profit from your purchase or use it as a future transaction.

If you plan to actually USE your currency then buy it close to the time you think you will need it. This way you will not be affected by market fluctuation. Otherwise, there are many theories of when to invest for profit in any asset – whether that is cryptocurrency, stocks, gold, real-estate, etc. Some people think you should buy when the market is going up so you can immediately profit from the upswing. Others say you should buy when the market is going down so you can profit by the eventual turn around of the market and make even more money than buying when it is already going up.

We feel that the best time to buy cryptocurrency as an investment is after you have researched the particular coin you want and you have learned about how to keep it safe.

A good trader should have a particular trading style which dictates when to sell their currency.

This should be decided even before you buy your currency.  Understand where the value of your currency is suited for sale beforehand and set a target price with the aim of making a profit. You should have a plan for when you will sell during a market which is going up (in order to lock in your profit), as well as a market which is going down (in order to limit your losses). Your plan could also be “time-based”, rather than “price-based”. This means that you can decide to sell, no matter the price, after a certain period of time. This is different from “timing the market” which tries to guess when to sell based on the current direction of prices.

This can apply to when to buy currency also. Then stick to your plan – don’t let the emotions caused by an unexpected change of price sway you.

Cryptocurrencies have crashed several times since bitcoin was first created in 2009.

Each time prices have gone on to recover and exceed all past highs. Cryptocurrencies most recently crashed again in the late fall of 2018.  Prices dropped almost 80% from their highs of 12 months earlier.  But we think that they will eventually recover and exceed all past all-time-highs once again. (But do not take this as financial advice). It is impossible to predict when, or if, cryptocurrency will crash again and if/when they will recover again. Be a wise trader and puts in place sound strategies to cope with any possible crashes in the future.  Do not buy any currency until you understand what you are buying, and why.

Cryptocurrency markets are fully electronic, without human intervention, and so they never close.  Using cryptocurrencies anyone from anywhere in the world can trade their coins or transfer funds to anyone, anywhere on the globe, at any time.

Cryptocurrency can be traded 24- hours a day since the cryptocurrency market is never closed. This market is maintained automatically by a distributed decentralized computer network around the world. Using cryptocurrencies anyone from anywhere in the world can trade their coins or transfer funds to anyone.  It does not matter what time of day is nor how far away the receiver is.

A very common way to buy your first cryptocurrency is via a centralized cryptocurrency exchange.  This type of exchange will allow you to use fiat currency (like Dollars, Euros, Pounds,…) to buy various types of coins.

Each exchange usually has a limited offering of bitcoin and/or various altcoins so the exchange you use will depend on the currency that you want to buy. Many of these exchanges will allow you to link your bank account to the exchange.  This will make it easier to transfer your fiat currency to the exchange to purchase cryptocurrency.

Some exchanges are regulated and others are not. A very limited example of just a few dependable exchanges are:

• CoinBase.com
• Coinsquare.com
• Kraken.com

There are also 100s of other exchanges around the world – Some are also very dependable, reliable and safe, (like our short list above).  But not all exchanges are safe and not all allow you to use fiat currency.  So do your homework before starting an account with an exchange.  Here are a few questions to ask:

• Trading and redemption fees.
• How they keep your currency safe?
• If you can use fiat to buy coins.
• How can y you transfer money in and out?
• What other coins can you buy on their exchange?
• Can you use credit card?
• Are funds under management insured (such as FDIC in the USA)

After you make your first purchase then you can continue to make more purchases on the same exchange, or you can transfer your currency to some other exchange. You can also use your new cryptocurrency to buy different currencies without the need to use your fiat currency again. Furthermore, you can now trade your cryptocurrencies on peer-to-peer networks to buy even more different kinds of altcoins. Very commonly people will buy bitcoin by using their fiat currency on a centralized exchange.  Then they will trade their bitcoin for other altcoins.  Bitcoin is often used as a “gateway” coin to buy other coins.

Coins can also be purchased from some special bitcoin dedicated ATM machines. Put your fiat currency into the machine and cryptocurrency will be transferred to your address.

Other ways to get cryptocurrency without buying it is to be paid for your work in cryptocurrencies.

In order to “trade” cryptocurrencies (i.e. trade one coin for a different one), you must first obtain one or more coins in some way. Usually, bitcoin or ether are the best coins to start trading with. Bitcoin and ether are the most tradable coins.

You can buy them, work for them, get them as a gift, etc …. (See “where do you buy cryptocurrency“)  Then you can start trading them for other coins.

One place to start trading after you have your obtained your initial coins is on the same exchange where you made your first purchase. You can usually trade for a limited number of other coins there. If the coin of your desire is not available on that same exchange then you will need to transfer your existing coins to some other exchange which offers the new coins.  Or you can move your initial currency into your own private wallet. Once it is in your wallet then you will have total control over what you can do with it, such as trading it for other currencies on any appropriate exchange.

Before you trade coins be sure that the exchange you will use is a legitimate exchange that follows appropriate security precautions. Also be sure that the coin you wish to buy is a legitimate coin and not some scam coin.