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Cryptocurrency
Investing



Cryptocurrency
Investing
by Kiana Danial


Cryptocurrency Investing For Dummies®
Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com
Copyright © 2019 by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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Library of Congress Control Number: 2019930733
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Manufactured in the United States of America
10 9 8 7 6 5 4 3 2 1


Contents at a Glance
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Part 1: Getting Started with Cryptocurrency
Investing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CHAPTER 1:

What Is a Cryptocurrency?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Why Invest in Cryptocurrencies? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
CHAPTER 3: Recognizing the Risks of Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . . . . . . 33
CHAPTER 4: Looking Under the Hood: Blockchain Technology . . . . . . . . . . . . . . . . . . . 49
CHAPTER 5: How Cryptocurrencies Work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
CHAPTER 2:


Part 2: The Fundamentals of Investing in Cryptos. . . . . . . . . . . 75
CHAPTER 6:

Cryptocurrency Exchanges and Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Using Cryptocurrency Wallets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
CHAPTER 8: Different Types of Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
CHAPTER 9: Identifying Top Performing Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . 125
CHAPTER 10: Diversification in Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
CHAPTER 7:

Part 3: Alternatives to Cryptos. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

149

CHAPTER 11: Getting

Ahead of the Crowd: Investing in ICOs. . . . . . . . . . . . . . . . . . . . 151
Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
CHAPTER 13: Stocks and Exchange Traded Funds with
Cryptocurrency Exposure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
CHAPTER 12: Cryptocurrency

CHAPTER 14: Cryptocurrency
CHAPTER 15: Dealing

Futures and Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

with the Dollar and Other Fiat Currencies. . . . . . . . . . . . . . . . . 191

Part 4: Essential Crypto Strategies and Tactics. . . . . . . . . . . . .

CHAPTER 16: Using

Technical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CHAPTER 18: Long-Term Investing Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CHAPTER 19: Minimizing Losses and Maximizing Gains . . . . . . . . . . . . . . . . . . . . . . . .
CHAPTER 20: Using Ichimoku and Fibonacci Techniques . . . . . . . . . . . . . . . . . . . . . . .
CHAPTER 21: Taxes and Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CHAPTER 17: Short-Term

203
205
217
231
239
249
257


Part 5: The Part of Tens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

265

CHAPTER 22: Ten

Considerations Before Getting Started
with Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267

CHAPTER 23: Ten
CHAPTER 24: Ten


Possible Moves When Your Crypto Portfolio Is Down . . . . . . . . . . 273
Challenges and Opportunities for Crypto Investors. . . . . . . . . . . . 279

Part 6: Appendixes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

285

APPENDIX A:Resources

for Cryptocurrency Investors . . . . . . . . . . . . . . . . . . . . . . . . . 287
APPENDIX B:Resources for Personal Portfolio Management . . . . . . . . . . . . . . . . . . . 303

Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

309


Table of Contents
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
About This Book. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foolish Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Icons Used in This Book. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beyond the Book. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Where to Go from Here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2
2
3
3

4

PART 1: GETTING STARTED WITH
CRYPTOCURRENCY INVESTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CHAPTER 1:

What Is a Cryptocurrency?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Beginning with the Basics of Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . 8
The definition of money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Some cryptocurrency history. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Key crypto benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Common crypto and blockchain myths. . . . . . . . . . . . . . . . . . . . . . . 11
Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Gearing Up to Make Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Wallets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Making a Plan Before You Jump In. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Select your cryptos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Analyze, invest, and profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

CHAPTER 2:

Why Invest in Cryptocurrencies? . . . . . . . . . . . . . . . . . . . . . . 17
Diversifying from Traditional Investments . . . . . . . . . . . . . . . . . . . . . . .
Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forex. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Precious metals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gaining Capital Appreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Historical returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Huge growth potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increasing Income Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A bit about traditional dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The basics on crypto dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fueling Ideological Empowerment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The economy of the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Freedom from government control of currency. . . . . . . . . . . . . . . .
Help for the unbanked and underbanked. . . . . . . . . . . . . . . . . . . . .

Table of Contents

18
18
20
21
23
25
25
27
28
28
28
29
29
30
31

vii



CHAPTER 3:

Recognizing the Risks of Cryptocurrencies . . . . . . . . . . 33
Reviewing Cryptocurrency Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital gains (or losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk: Flipping the Other Side of the Coin. . . . . . . . . . . . . . . . . . . . . . . . .
Glimpsing Cryptocurrencies’ Reward versus Risk. . . . . . . . . . . . . . . . . .
Digging into Different Kinds of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crypto hype risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vanishing risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulation risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exploring Risk Management Methods. . . . . . . . . . . . . . . . . . . . . . . . . . .
Build your emergency fund first. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Be patient. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversify outside and inside your cryptocurrency portfolio . . . . . .

CHAPTER 4:

Looking Under the Hood: 
Blockchain Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Breaking Down Blockchain Technology Basics. . . . . . . . . . . . . . . . . . . .
What is a blockchain, and how does it work? . . . . . . . . . . . . . . . . . .
How does a blockchain secure itself?. . . . . . . . . . . . . . . . . . . . . . . . .
Why is blockchain revolutionary? . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Perusing Problems with Blockchain. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scalability problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fraud problems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Political problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What Can Blockchain Be Used for?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supply chain monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identity verification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal ownership of stuff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internet of Things (IoT). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

viii

34
34
34
35
36
37
37
38
40
41
41
42

43
43
45
45
47

Cryptocurrency Investing For Dummies

50
50
52
53
55
56
57
57
58
58
58
59
59
59
60
60
60
61
61


CHAPTER 5:


How Cryptocurrencies Work . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Explaining Basic Terms in the Cryptocurrency Process. . . . . . . . . . . . .
Cryptography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nodes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proof-of-work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proof-of-stake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proof-of-importance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transactions: Putting it all together . . . . . . . . . . . . . . . . . . . . . . . . . .
Cruising through Other Important Crypto Concepts. . . . . . . . . . . . . . .
Adaptive scaling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decentralization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Harvesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Open source. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Public ledger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Smart contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stick a Fork in It: Digging into Cryptocurrency Forks . . . . . . . . . . . . . . .
What is a fork, and why do forks happen?. . . . . . . . . . . . . . . . . . . . .
Hard forks and soft forks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Free money on forks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63
65
66
66
67
67
68
68

69
69
69
69
70
70
70
71
71
72
73

PART 2: THE FUNDAMENTALS OF
INVESTING IN CRYPTOS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
CHAPTER 6:

Cryptocurrency Exchanges and Brokers . . . . . . . . . . . . . 77
Distinguishing Crypto Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centralized exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decentralized exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hybrid exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to choose an exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Considering Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How brokers work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The pros and cons of using a broker . . . . . . . . . . . . . . . . . . . . . . . . .
How to choose a broker. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Looking at Other Methods for Buying Cryptos. . . . . . . . . . . . . . . . . . . .
Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PayPal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cryptocurrency ATMs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table of Contents

78
78
81
83
84
87
88
88
90
91
91
91
91
92
93

ix


CHAPTER 7:

Using Cryptocurrency Wallets. . . . . . . . . . . . . . . . . . . . . . . . . . 95
Defining Cryptocurrency Wallets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
A few important terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
How a wallet works. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Looking at Different Types of Wallets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Online wallet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Mobile wallet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Desktop wallet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Hardware wallet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Paper wallet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Choosing a Crypto Wallet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Based on security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Based on your crypto ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Based on transaction fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Based on anonymity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Keeping Your Wallet Secure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Back up your wallet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Have multiple wallets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Add more security levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Update your software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Remember where you hide it!. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

CHAPTER 8:

Different Types of Cryptocurrencies. . . . . . . . . . . . . . . .

109

Celebrating Celebrity Cryptocurrencies by Market Cap. . . . . . . . . . . . 109
Bitcoin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Ethereum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Ripple. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113
Litecoin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Other top ten major cryptos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Top 100 major cryptos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Cryptocurrencies by Category. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Payment cryptos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Privacy cryptos. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Platform cryptos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Exchange-specific cryptos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Finance/fintech cryptos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Legal and property cryptos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
CHAPTER 9:

x

Identifying Top Performing Cryptocurrencies. . . . .

125

Introducing the Invest Diva Diamond Analysis. . . . . . . . . . . . . . . . . . .
Using Fundamental Analysis to Pick Cryptocurrencies . . . . . . . . . . . .
Go with what you know . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Choose the right categories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Check out cryptos’ websites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

126
127
127
128
129

Cryptocurrency Investing For Dummies



Choosing Cryptos with Sentimental Analysis . . . . . . . . . . . . . . . . . . . .
Key sentimental elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stuff to check in the news . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trying Technical Analysis to Select Cryptos. . . . . . . . . . . . . . . . . . . . . .

131
131
134
136

Diversification in Cryptocurrencies. . . . . . . . . . . . . . . . .

137

Breaking Down Some Basics on Diversification . . . . . . . . . . . . . . . . . .
What is traditional diversification? . . . . . . . . . . . . . . . . . . . . . . . . . .
How does diversification reduce risk? . . . . . . . . . . . . . . . . . . . . . . .
Using Cryptocurrencies in Long-Term Diversification. . . . . . . . . . . . .
Diversifying with non-cryptocurrencies. . . . . . . . . . . . . . . . . . . . . .
Diversifying among cryptocurrencies. . . . . . . . . . . . . . . . . . . . . . . .
Tackling Diversification in Short-Term Trades . . . . . . . . . . . . . . . . . . .

137
138
138
140
141
143
147


PART 3: ALTERNATIVES TO CRYPTOS. . . . . . . . . . . . . . . . . . . . . . . .

149

CHAPTER 10:

CHAPTER 11:

CHAPTER 12:

CHAPTER 13:

Getting Ahead of the Crowd: Investing in ICOs. . . .

151

Understanding the Basics of Initial Coin Offerings. . . . . . . . . . . . . . . .
How an ICO works and how to start one. . . . . . . . . . . . . . . . . . . . .
ICOs versus IPOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing in an ICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finding ICO listings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Analyzing an ICO listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outlining the ICO investment process. . . . . . . . . . . . . . . . . . . . . . .
Holding your tokens after your purchase . . . . . . . . . . . . . . . . . . . .
So You Want to Start an ICO: Launching an ICO Yourself. . . . . . . . . .
Understanding the challenges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taking a few steps before the launch. . . . . . . . . . . . . . . . . . . . . . . .

151

152
153
155
155
156
158
159
159
160
160

Cryptocurrency Mining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

163

Understanding How Mining Works in a Nutshell. . . . . . . . . . . . . . . . .
Discovering What You Need to Mine . . . . . . . . . . . . . . . . . . . . . . . . . . .
Before you begin: The mining profitability of different cryptos. . . .
Mining hardware. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mining software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mining pools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A mining setup example. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diving in and making sure mining is worth your time. . . . . . . . . .

163
165
166
167
167
168

169
170

Stocks and Exchange Traded Funds
with Cryptocurrency Exposure. . . . . . . . . . . . . . . . . . . . . . .

173

Looking for Stocks with Exposure to Cryptos . . . . . . . . . . . . . . . . . . . .
Fundamentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market sentiment factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

174
174
177
178

Table of Contents

xi


Considering Cryptocurrency and Blockchain ETFs. . . . . . . . . . . . . . . . 179
Getting an overview of blockchain ETFs. . . . . . . . . . . . . . . . . . . . . . 179
Keeping an eye on other indexes . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
CHAPTER 14:

183


Focusing on the Fundamentals of Futures . . . . . . . . . . . . . . . . . . . . . .
Futures’ features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introducing the Basics of Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Futures versus options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Puts and calls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Understanding Cryptocurrency Derivatives Trading . . . . . . . . . . . . . .
The advantages of crypto derivatives trading. . . . . . . . . . . . . . . . .
The advantages of crypto derivatives for the industry . . . . . . . . .
Trading resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

184
184
185
186
186
187
187
188
188
188
189

Dealing with the Dollar and Other Fiat
Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

191

Considering the World’s Reserve Currency: The U.S. Dollar. . . . . . . .

Focusing on factors that affect the U.S. dollar . . . . . . . . . . . . . . . .
Looking at Bitcoin versus the U.S. dollar. . . . . . . . . . . . . . . . . . . . .
Examining the Euro and Other Major Currencies. . . . . . . . . . . . . . . . .
The euro and the British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safe havens: The Swiss franc and the Japanese yen . . . . . . . . . . .
The Aussie, Kiwi, and Canadian dollars . . . . . . . . . . . . . . . . . . . . . .
Comparing the Forex Market and the Crypto Market . . . . . . . . . . . . .
The similarities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resources for forex trading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

192
193
194
196
196
198
198
199
199
200
200

PART 4: ESSENTIAL CRYPTO STRATEGIES
AND TACTICS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

203

Using Technical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


205

Beginning with the Basics of Technical Analysis. . . . . . . . . . . . . . . . . .
The chart art. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The time factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The psychology factor: Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spotting the Key Levels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Support levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resistance levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trends and channels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
When the trend is no longer your friend. . . . . . . . . . . . . . . . . . . . .

206
206
209
210
210
210
211
212
213

CHAPTER 15:

CHAPTER 16:

xii

Cryptocurrency Futures and Options. . . . . . . . . . . . . . .


Cryptocurrency Investing For Dummies


CHAPTER 17:

CHAPTER 18:

CHAPTER 19:

Picking Out Patterns on a Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bullish reversal patterns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bearish reversal patterns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Smoothing Charts Out with Moving Averages . . . . . . . . . . . . . . . . . . .
Basic moving averages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sophisticated moving averages. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

213
214
214
215
216
216

Short-Term Trading Strategies. . . . . . . . . . . . . . . . . . . . . . .

217

Distinguishing Three Short-Term Time Frames . . . . . . . . . . . . . . . . . .
Profiting within hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profiting within days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Profiting within weeks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trying Short-Term Analysis Methods. . . . . . . . . . . . . . . . . . . . . . . . . . .
Deciphering chart patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using indicators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Avoiding illegal pump-and-dump stuff. . . . . . . . . . . . . . . . . . . . . . .
Managing Short-Term Trading Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .

217
218
221
222
223
223
227
228
228

Long-Term Investing Strategies. . . . . . . . . . . . . . . . . . . . . .

231

Time Is on Your Side: Getting Started with Long-Term Investing. . . .
Your personal goals and current situation . . . . . . . . . . . . . . . . . . .
Your portfolio’s objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Creating Long-Term Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Observing psychological levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling when you reach your goal. . . . . . . . . . . . . . . . . . . . . . . . . . .
Keeping tax consequences in mind . . . . . . . . . . . . . . . . . . . . . . . . .
Considering Limit and Stop-Loss Orders. . . . . . . . . . . . . . . . . . . . . . . .
Limit orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stop-loss orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

231
232
233
234
234
235
236
236
236
237

Minimizing Losses and Maximizing Gains. . . . . . . . . .

239

Keeping the Losses Down . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Measuring returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Monitoring exchange fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Understanding the art of getting out. . . . . . . . . . . . . . . . . . . . . . . .
Letting the Profits Rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buying at the bottom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Knowing that patience is a profitable virtue. . . . . . . . . . . . . . . . . .
Identifying the peaks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finding peaks and bottoms with a few trading tools. . . . . . . . . . .

240
240
241

242
244
244
245
245
247

Table of Contents

xiii


CHAPTER 20:

CHAPTER 21:

Using Ichimoku and Fibonacci Techniques . . . . . . . .

249

Getting a Handle on Ichimoku Kinko Hyo . . . . . . . . . . . . . . . . . . . . . . .
The components of Ichimoku Kinko Hyo. . . . . . . . . . . . . . . . . . . . .
Ichimoku interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introducing Fibonacci Retracement Levels . . . . . . . . . . . . . . . . . . . . . .
Some background on Fibonacci . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to insert Fibonacci retracement levels into your chart. . . . .
Combining Ichimoku and Fibonacci Techniques . . . . . . . . . . . . . . . . .

249
250

251
252
253
253
254

Taxes and Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . . . . . .

257

Distinguishing Three Types of Crypto Taxes. . . . . . . . . . . . . . . . . . . . . 257
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258
Long-term capital gain taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
Short-term capital gain taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
Minimizing Your Crypto Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
Lowering your mining income tax. . . . . . . . . . . . . . . . . . . . . . . . . . .260
Reducing your trading tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
Bringing down your capital gain taxes. . . . . . . . . . . . . . . . . . . . . . . 261
Checking the rate of your state. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
Evaluating Taxable Income from Crypto Transactions . . . . . . . . . . . . 263
Tracking your crypto activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
Handling crypto forks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
Reporting international crypto investments. . . . . . . . . . . . . . . . . . 264

PART 5: THE PART OF TENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

265

Ten Considerations Before Getting
Started with Cryptocurrencies. . . . . . . . . . . . . . . . . . . . . . .


267

CHAPTER 22:

Don’t Get Too Excited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
Measure Your Risk Tolerance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
Protect Your Crypto Wallet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
Find the Best Crypto Exchange/Broker for You . . . . . . . . . . . . . . . . . . 268
Determine Whether You Should Invest Short Term or
Long Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .269
Start Small . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
Follow the Cause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Mull Over Mining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Look into Investing in Other Assets First. . . . . . . . . . . . . . . . . . . . . . . . 270
Get a Support Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271
CHAPTER 23:

Ten Possible Moves When Your Crypto
Portfolio Is Down . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

273

Do Nothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273
Reevaluate Your Risk Tolerance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274

xiv

Cryptocurrency Investing For Dummies



Look at the Big Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research the Fundamental Reasons the Crypto Is Down. . . . . . . . . .
Consider Hedging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversify within Crypto Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversify across Other Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange with a Better Crypto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Think about Adding to Your Current Position. . . . . . . . . . . . . . . . . . . .
Contemplate Cutting Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

274
275
275
276
276
276
277
277

Ten Challenges and Opportunities
for Crypto Investors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

279

New Cryptos on the Block . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finding Economic Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hackers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bubbles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Down Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

New Currencies and Projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Falling in Love with a Crypto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using Invest Diva Diamond Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . .

279
280
281
281
281
282
282
283
283
284

PART 6: APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

285

Resources for Cryptocurrency Investors. . . . . . . . . . .

287

Resources for Personal Portfolio
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

303

CHAPTER 24:


APPENDIX A:

APPENDIX B:

INDEX

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309

Table of Contents

xv



Introduction

M

ore than 2,000 cryptocurrencies currently exist at the time of writing.
Cryptos gained a lot of mainstream hype in 2017, when Bitcoin’s value
increased 1,318 percent. This surge was nothing compared to the gains of
some other digital assets, such as Ripple, which went up (hold your breath) a
whopping 36,018 percent. These returns are more than what a stock investor
could normally make in a lifetime, and they generated enough interest to create a
true frenzy.
However, the bubble burst at the beginning of 2018, leaving many late investors,
who bought cryptocurrencies at a very high price, at a loss. That was enough for
some newbie investors to label the whole industry a scam and either give up on
investing altogether or go back to traditional financial assets like stocks. Regardless, the cryptocurrency market continued evolving, became more stable, and

caught the attention and support of many major financial institutions globally
and in the United States. As more people get their hands on cryptocurrencies,
more sellers feel comfortable accepting them as a payment method, and that’s
how the whole industry can flourish.
The foundation of cryptocurrencies such as Bitcoin lies in a new technology called
the blockchain; it’s the infrastructure that cryptocurrencies are built on. Blockchain is a disruptive technology that many argue is bigger than the advent of the
Internet. The applications of blockchain don’t end with cryptocurrencies, though,
just like the applications of the Internet don’t end with email.
The unique thing about cryptocurrency investing and trading is that a crypto is a
cross between an asset (like stocks) and a currency (like the U.S. dollar.) Analyzing
the fundamentals behind a cryptocurrency is very different from analyzing any
other financial asset. The traditional ways of measuring value don’t work in the
crypto industry, mainly because in many cases the crypto data isn’t stored in a
central hub somewhere. In fact, most cryptocurrencies and their underlying
blockchain are decentralized, which means no central authority is in charge.
Instead, the power is distributed among the members of any given blockchain or
crypto community.

Introduction

1


About This Book
You may have heard of some of the famous cryptocurrencies, like Bitcoin, but the
industry doesn’t end there — far from it. And although the crypto market has a
ton of volatility, it also has potential for you to make real money by investing
wisely and developing strategies that suit your personal risk tolerance. In this
book, I tap into the risks involved in cryptocurrency investing and show you the
different methods you can use to get involved.

The topic of cryptocurrencies and their underlying blockchain technology can be a
bit confusing. That’s why I try my best to keep Cryptocurrency Investing For ­Dummies
easily accessible and relatable and free of intimidating terminology. But it does
contain some serious information about strategy development, risk management,
and the whole industry in general.
As you dip into and out of this book, feel free to skip the sidebars (shaded boxes)
and the paragraphs marked with the Technical Stuff icon. They contain interesting information but aren’t essential to becoming a crypto investor.
This book contains a lot of web addresses to get you additional information about
certain topics. Some of the web addresses are affiliate links, meaning that if you
click them and start using a company’s services through that specific web address,
I may earn an affiliate payment for making the introduction. You also may note
that some web addresses break across two lines of text. If you’re reading this book
in print and want to visit one of these web pages, simply key in the web address
exactly as it’s noted in the text, pretending as though the line break doesn’t exist.
If you’re reading this work as an e-book, you’ve got it easy — just click the web
address to be taken directly to the web page.

Foolish Assumptions
I’ve made some assumptions about you and your basic knowledge of investing and
the cryptocurrency market:

»» You may have heard of or even own some cryptocurrencies, but you don’t
really know how they work.

»» Though you may have invested in other markets like the stock market before,
you aren’t necessarily familiar with the terminology and the technical aspects
of trading and investing cryptocurrencies.

2


Cryptocurrency Investing For Dummies


»» You know how to operate a computer and use the Internet. If you don’t have

high-speed access to the Internet now, be sure you have it before trying to get
involved in the cryptocurrency market. You need high-speed access to be able
to work with many of the valuable online tools I recommend in this book.

Icons Used in This Book
For Dummies books use little pictures, called icons, to mark certain chunks of text.
Here’s what they actually mean:
If something is particularly important for you to take away from this book, I mark
it with this icon.

Watch for these little flags to get ideas on how to improve your crypto investing
skills or where to find other useful resources.

The cryptocurrency market and investing in general have many risks. Some
­mistakes can cost you a ton of money, so I use this icon to point out particularly
dangerous areas.
This icon designates some interesting facts and sometimes funny anecdotes that
I feel you may enjoy reading but that aren’t essential to your crypto investing
journey.

Beyond the Book
In addition to the material you’re reading right now, this product also comes with
some access-anywhere goodies on the web. When you just want a quick reminder
of basics like what you need before you invest and how to check crypto fundamentals, check out the free Cheat Sheet at www.dummies.com; just search for
­“Cryptocurrency Investing For Dummies Cheat Sheet.”


Introduction

3


Where to Go from Here
Cryptocurrency Investing For Dummies isn’t your typical book, where you start from
the beginning and read through the end. Depending on your interest, knowledge
on the matter, and investment goals, you can start anywhere you want. For
example,

»» If you’re already familiar with cryptocurrency basics and know how they work,
where to buy them, and where to securely store them, you may want to start
with Part 4 to explore different investment and trading tactics.

»» Chapter 22 gives you an overview of things to consider before you start your
cryptocurrency journey and cross-references to other chapters if you need
further information.

»» Chapter 3 is a great (and essential) place to explore methods of risk management before pulling the trigger and jumping on the crypto wagon.

»» If you’re looking for alternative ways to get involved in the cryptocurrency

market, check out Chapter 12 for crypto mining, Chapter 11 for initial coin
offerings (ICOs), and Chapter 14 for crypto futures and options.

4

Cryptocurrency Investing For Dummies



1

Getting
Started with
Cryptocurrency
Investing


IN THIS PART . . .

Know what you’re getting into before buying, investing,
or trading cryptocurrencies.
Understand the risks involved in the cryptocurrency
market and how to manage them.
Discover how the underlying technology behind
cryptocurrencies (the blockchain) makes them unique
and revolutionary.
Familiarize yourself with how different types of
cryptocurrencies operate.


IN THIS CHAPTER

»» Looking at the what, why, and how
of the advent of cryptocurrencies
»» Getting an overview of your first
steps before starting your crypto
journey


1

Chapter 

What Is a
Cryptocurrency?

S

o you’ve picked up this book, and your first question is probably this: “What
the heck is a cryptocurrency, anyway?” Simply stated, a cryptocurrency is a
new form of digital money. You can transfer your traditional, non-­
cryptocurrency money like the U.S. dollar digitally, but that’s not quite the same
as how cryptocurrencies work. When cryptocurrencies become mainstream, you
may be able to use them to pay for stuff electronically, just like you do with traditional currencies.
However, what sets cryptocurrencies apart is the technology behind them. You
may say, “Who cares about the technology behind my money? I only care about
how much of it there is in my wallet!” The issue is that the world’s current money
systems have a bunch of problems. Here are some examples:

»» Payment systems such as credit cards and wire transfers are outdated.
»» In most cases, a bunch of middlemen like banks and brokers take a cut in the
process, making transactions expensive and slow.

»» Financial inequality is growing around the globe.
»» Around 3 billion unbanked or underbanked people can’t access financial
services. That’s approximately half the population on the planet!

CHAPTER 1 What Is a Cryptocurrency?


7


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