The crypto market is a place to buy, sell, swap, and hold digital currencies. It’s also a financial market, with prices that rise and fall according to supply and demand — just like stocks.
Cryptocurrencies were created with the goal of revolutionizing financial infrastructure. While they have achieved that in some ways, they also carry substantial risks.
For one, they’re not backed by any government or central bank, and so their value is entirely dependent on the market. As such, they can be very volatile, and even stable coins can see dramatic price swings. In addition, cryptocurrencies have no consumer protections, like chargebacks, that help consumers recover their losses if they lose money.
As a result, despite the excitement about blockchain technology and the potential to disrupt traditional finance, many people still view the crypto markets as risky places to invest. And while there are plenty of legitimate reasons to invest in the crypto world, it’s important to be informed before taking the leap.
One way to do that is to understand the different types of coins. Some are primarily transactional, like Bitcoin and Ethereum; others serve specific functions on a blockchain (like governance tokens or an oracle); while others are meant to be investment vehicles in their own right. This way, you can choose which coins are most appropriate for your investing style and goals.