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Bitcoin Explained: 3 Easy Analogies for Understanding Bitcoin

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Bitcoin explained

I’ve been drinking a lot of coffee lately with a lot of financial advisors and wealth managers who want to know about bitcoin. The first question they ask me is, “Why are your teeth vibrating?” (Answer: I’ve been drinking a lot of coffee lately.)

After that, here are the top three questions they ask me about bitcoin:

  • What is it?
  • Should I buy it?
  • How do I buy it?

For those of us who have been investing in this world for years, it’s easy to forget that even sophisticated financial professionals are still trying to understand how it works, and how the New Finance revolution is going to impact their lives.

To make the world of bitcoin more accessible to traditional investors, here are three analogies that might help.

Bitcoin explained

Bitcoin is Like a Checking Account

When you withdraw money from an ATM, you’ll see a number representing the balance in your checking account. The bank doesn’t show you a picture of all your cash sitting in neat piles, just a number.

You may have the illusion that cash is the only thing that’s “real,” and this number represents your cash available. The numbers, you might think, are a shortcut. But it’s more accurate to say that the numbers are more real than the cash.

It’s true that you could withdraw that money into cash, but you probably won’t. More and more is handled by credit or debit cards, automatic withdrawals, or checks. There’s no cash exchanged, just numbers flying from one account to another.

Cash is just a physical representation of the numbers, and an inconvenient one at that: cash can be lost, stolen, or put in the washing machine. Cash is untraceable, so it can be used for criminal activities. It’s risky to even hold cash in your pocket, especially if you live in New York.

And even cash is an illusion, because if everyone tried to withdraw their cash at the same time (like during a financial crisis), the system would collapse. The banks don’t really hold all that cash; like you, they just hold enough to manage their daily needs.

So you don’t really own cash, you own a number. When you own bitcoin, you don’t own a thing, you just own a number. Like a checking account, you could exchange bitcoin for cash. But unlike your checking account, bitcoin has the potential to greatly increase in value.

Which brings us to our second analogy…

Bitcoin is Like a Stock

Imagine you bought Apple stock in 2013, just before it began its great bull run. Back then it was $75 a share; today it’s trading at $175. That would have represented a 133% profit in five years.

Now imagine you bought bitcoin in 2013, when it was around $100 per bitcoin. Today, that bitcoin is worth around $15,000, for a 14,900% profit in five years. That’s not a typo.

  AAPL Bitcoin
Price in 2013 $75 $100
Price today $175 $15,000
Profit $100 $14,900
% profit 133% 14900%
$1000 would be worth $2,333 $150,000

Like your Apple stock, you could have sold your bitcoin at any time (and many did, much to their later regret). You could have also bought bitcoin at any time using dollar-cost averaging, investing $100 a month regardless of the price.

A share of stock is a small piece of ownership in a company … but is it really? As a shareholder, you can’t walk into Apple headquarters and demand to talk to Tim Cook. You do have certain rights, but the truth is you’re hoping Apple stock will appreciate in value, and be worth more than you paid for it.

In that sense, bitcoin is like stock: most investors are holding onto it, hoping that it will continue to increase in value. Bitcoin can be bought, sold, and traded on online exchanges, just like stock. The more people have confidence in it, the higher the price goes—just like a popular stock.

People get confused because bitcoin is often called a “digital currency.” Bitcoin is a digital currency, and you can use it to pay for (a few) things, but the truth is that most investors are not using bitcoin to pay for their morning latte. Why would you, when that $4.00 worth of bitcoin may eventually buy the entire coffee shop?

I’m spending too much time in coffee shops. Here’s the third analogy…

Bitcoin explained

Bitcoin is Like Email

Back in the day, there was something called “mail,” which was delivered in small parcels called “envelopes,” and paid for with colorful stickers called “stamps.” It was slow and inefficient, and it wasted a lot of trees, but it gave the government something to do.

Eventually, humans evolved from mail into email, but the transition was not without challenges. “I just click a button, and the email is delivered?” “How do I know it sent?” “Who is this strange person reaching out to me?” “Why am I getting all these Viagra ads?”

You can send and receive bitcoin using a simple address. You don’t need to go to the bank and withdraw cash, you don’t need to write a check, you don’t need to do a wire transfer that takes three days and requires your mother’s maiden name (which everybody knows by now).

Just an address. Like email.

Email is second nature to us now, just as bitcoin (and digital currencies) will be second nature to us in the future. As the price stabilizes and the technology improves, we’ll be using bitcoin—or something like it—to pay for everything. It will be like the transition from snail mail to email.

Cash will still exist in some form, just like we still use postal mail when we need to send Christmas cards or thank you notes. But how many of us pine for the days when everything had to be sent in the mail? The whole system now seems clunky and outdated, like VHS tapes.

None of these analogies are perfect, because bitcoin really is something new. Hopefully they help you understand a bit of bitcoin’s promise and potential. But should you buy it, and how do you buy it? That’s where Bitcoin Market Journal can help: subscribe and we’ll show you how.

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Bitcoin Explained: 3 Easy Analogies for Understanding Bitcoin was originally posted at https://www.bitcoinmarketjournal.com/bitcoin-explained/ by Sir John Hargrave

 

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Cryptocurrency Glossary: Dictionary of Cryptocurrency and Bitcoin Terms

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Cryptocurrency Glossary

The cryptosphere is getting more crowded than ever. More and more people are joining the space every day with the hopes of making quick money.

However, in the process, they are bombarded with numerous terminologies and crypto jargons that makes most of them feel out of the sink.

When I started, I felt the same. But trust me when I say that learning these new terms and jargons is worth every bit of the hassle. Needless to say, it might seem overwhelming at first, but you will get used to it with time. If you intend to stay in the game, it is very important that you understand the terms used in the cryptosphere.

Moreover, if you are not a quick learner and don’t like updating yourself, you are destined to get outdated very soon considering this space is growing at an astronomical pace.

Keeping all these factors in mind, I have compiled a list of cryptocurrency terms and Bitcoin terminologies that you need to know and understand for a successful outing in the crypto world.

A Glossary of all the Cryptocurrency Terms you need to know

1. Bitcoin: When the B is capitalized, it represents the overarching concept of Bitcoin: The technology, the community, the protocol, and the software.

2. bitcoin: When the b is not capitalized, it is describing the unit of currency.

3. Altcoins: Alternative cryptocurrencies to Bitcoin. Examples: Ethereum, Litecoin, Dogecoin etc.

4. Bit: A sub-unit of bitcoin. 1 bitcoin (BTC) = 1,000,000 bits. You can always buy and sell less than one bitcoin.

5. Satoshi: A Satoshi is the smallest unit of Bitcoin. It is named after Satoshi Nakamoto, the creator of Bitcoin. Each BTC is divisible until the 1/10^8 part. A unit of Satoshi is equal to 0.00000001 bitcoin.

6. XBT and BTC: Common abbreviations for bitcoin. There is no difference between these two abbreviations.

7. Confirmation: When a Bitcoin transaction takes place, the blockchain confirms the transaction’s validity. The confirmation is done by “miners” every 10 minutes when a block is mined. It is always advised that you wait for at least 6 confirmations to avoid double spending.

8. Mining: The process of computer hardware doing mathematical calculations for the Bitcoin network to confirm transactions and increase security. Users who use their computers and/or rent resources for mining are called miners.

9. Recovery phrase/seed keyword: Random 12, 18, 24 words that are used to derive numerous pairs of private and public keys. Using these seeds, you can restore your wallet in any other supported seed key wallet.

10. Cryptography: A branch of mathematics and computer science that is behind the invention of cryptocurrencies.

11. Private Key: A private key is a secret, alphanumeric password/number used to spend/send your bitcoins to another Bitcoin address.

12. Public Key/Bitcoin address: This is another alphanumeric address/number which is derived from private keys and is used to publicly receive bitcoins.

13. Bitcoin wallet (Hardware, Software, Mobile wallet): A physical or software object where you have a combination of public and private key stored. Here you can find a list of best hardware wallets.

14. Whitepaper: A report which articulates the problem and solution that the blockchain project/cryptocurrency is trying to solve.

15. Transaction ID: Another alphanumeric string through which you can publicly see the transfer details (amount sent, sending/receiving bitcoin address, as well as the date of transfer) on the bitcoin blockchain.

16. Blockchain: A universal public ledger of bitcoin transactions till date.

17. Satoshi Nakamoto: The anonymous creator of Bitcoin.

18. Cold storage: A kind of storage where you keep Bitcoin private keys offline.

19. HD wallet: Wallets which generate the hierarchical tree-like structure of numerous public and private keys starting from the root seed key.

20. Hardware wallet: A hardware device which stores public and private keys of Bitcoin.

23. Transaction fees: Bitcoin transaction incentives that the miners receive for mining block via bitcoins, which is actually a small fee that the bitcoin users pay in order to complete BTC transactions.

24. P2P: It means peer to peer or person to person.

25. Block: A group of bundled-up transactions which miners choose to verify.

26. Proof Of Work: A decentralized consensus mechanism that is done by mining algorithms by spending computational power.

27. Proof Of Stake: A decentralized consensus mechanism in which your existing stake in currency is used to mine or forge blocks to reach the consensus.

28. Pump & Dump: Massive buying and selling of cryptocurrencies when the price is to one’s benefit.

29. Hash: A digital fingerprint of a fixed size produced by a hashing algorithm by processing data of any arbitrary size (numbers, alphabets, media files).

30. ICO: Initial Coin Offering of new crypto coins or tokens offered to the general public in return for their fixed priced investments. It is a new way of decentralized crowdfunding.

31. Hard Fork: A software update or an update on the blockchain protocol that is not backward compatible.

32. Soft Fork: A software update or an update on the blockchain protocol that is backward compatible.

33. Faucet: A service or website that pay you in cryptocurrencies in exchange for playing games or doing certain tasks.

34. Fiat: A regulated and centralized paper currency of any nation.

35. Block Reward: It is a reward in the form of native cryptocurrency given to miners for solving a computationally difficult problem. Bitcoin miners now get 12.5 BTC for solving each problem for adding blocks to the blockchain.

36. ASIC Miner: An application-specific integrated circuit machine designed specifically for mining cryptocurrencies.

37. Block Height: It is the number of blocks mined after the genesis block.

38. Halving: It is the 50% reduction in block reward after a certain number of blocks are mined. In Bitcoin, the halving happens after every 210,000 blocks.

39. Hash Rate: Hash Rate or Hash Power is the measuring unit of the power Bitcoin network is consuming to be continuously functional.

40. Crypto Exchange: A website that helps one buy/sell cryptocurrencies. Here is a list of top exchanges.

41. Limit Order (Limit Buy/Limit Sell):  Buy/Sell orders placed by traders to buy or sell a crypto-currency when the price meets their target amount. 

42. HODL: It is a meme term which is basically means hold or Hold on for dear life. It means to hold onto the cryptocurrency that you have invested and ignore the sentiments.

43. Whale: It refers to an entity or a person who holds an absurd amount of particular cryptocurrency and has the potential to manipulate the market.

44. Bullish: A feeling based on some factors that the price of a crypto will increase.

45. Bearish: A feeling based on some factors that the the price of a crypto will decrease.

46. ATH: An All-time-high price of a cryptocurrency.

47. FOMO: Fear of missing out. A feeling in which you want to get onboard a skyrocketing price rally.

48. FUD: Fear, Uncertainty and Doubt related to the market.

49. FUDster: A person who spreads FUD based on facts or gut feelings.

50. To The Moon: Refers to price moving to astronomical heights.

51. Bag Holder: Someone still holding an altcoin after a pump and dump crash.

Conclusion

With time, and the ever evolving crypto space, I am sure that many new terms will come up. Hence, I will keep updating this list of cryptocurrency terms regularly on CoinSutra.

Know some more common crypto jargons that can be added to this list? Let me know in the comments below!

READ LATER - DOWNLOAD THIS POST AS PDF >> CLICK HERE <<

 

Cryptocurrency Glossary: Dictionary of Cryptocurrency and Bitcoin Terms was originally posted at https://coinsutra.com/cryptocurrency-glossary-terminology/ by Sudhir Khatwani

 

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Best Cryptocurrency Tips for Beginners

Should You Borrow Money to Buy Bitcoin?

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Buy bitcoin

Borrowing money to buy bitcoin is a perilous undertaking with tremendous risks. What if you borrow $19,000 to buy one bitcoin, but BTC suddenly drops to $10,000? You still have to pay back the $19,000 with interest and your asset has lost nearly half its value. These kinds of declines, even if they are temporary, can leave you in agony, hoping your asset returns to the price you paid for it.

It is possible to borrow money from your credit card to buy bitcoin, Litecoin, Ethereum, or Bitcoin Cash through CoinBase. If you pay off the credit card every month, you should be okay. Credit cards are a convenient way to lend money. However, do not miss payments because you can suffer from late fees, interest expenses, or possible downgrading of your credit score.

If you are a holder of bitcoin, you can use your bitcoin to borrow money in order to buy more bitcoin. This type of leverage has been common for stocks on Wall Street for a long time, but now these types of arrangements are popping up in the crypto markets. If this type of arrangement interests you, check out our recent article detailing seven borrowing and lending platforms for bitcoin.

Leveraged Returns

Traders and investors use debt to increase their returns. Let’s say you have $100,000. You borrow another $100,000. You might be able to double your returns, and if your return is 10 percent, you could make $20,000. But what if your investment goes south and you lose 10 percent or $20,000? You still have to pay back the loan with interest, which compounds your losses.

Some traders are overly dependent on debt in order to make returns. The borrow-to-buy mentality can lead to a dreadful trap. You may never get out of debt, and you are always making debt payments as a slave to lenders.

You can look for examples on Wall Street on how leverage affects investments like exchange-traded funds (ETFs). Investors like Tristan Yates have studied leveraged 2x Bull ETFs and 2X Bear ETFs and concluded these leveraged ETFs are a constant leverage trap and do not double returns of an underlying index. These funds only double the daily return, and there is a big difference between doubling the daily return and doubling the annual return.

Other Risks

Another reason to avoid debt with cryptocurrency is the massive volatility in the price of coins. For example, if you borrowed $19,000 to buy one bitcoin on Dec. 17, 2017, you would have lost 30 percent of your investment by Dec. 31, 2017, when the price dropped to $13,000. Then you would have had to decide whether to hold onto your bitcoin until it gets back to $19,000 — all the while paying interest on the loan. Suppose your interest rate is 9 percent. That is $1,710 per year in interest expense, and that does not include principal payments.

Buy bitcoin

There are better ways to acquire bitcoin than borrowing!

A Better Way

There is a better, safer way to invest. Develop an aggressive payment plan to get out of debt. This way 100 percent of your discretionary income is yours to spend, save, or invest. What money you once spent on debt payments can now go into investments, potentially increasing your savings rate. One of the surest and fastest ways to gain wealth is by becoming a debt-free investor who saves and invests 15 percent of annual income.
A wise investor will diversify assets; that way, if one asset class falls apart, he is not ruined. Crypto is an important asset class. Yet crypto is highly volatile, with higher risks than owning the S&P 500. Do not compound your risk in crypto by borrowing money to buy it.

Investing in cryptocurrencies is complex and challenging with plenty of opportunities. Stay up-to-date with the latest news in cryptocurrencies by subscribing to the Bitcoin Market Journal newsletter.

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Should You Borrow Money to Buy Bitcoin? was originally posted at https://www.bitcoinmarketjournal.com/buy-bitcoin-instantly/ by Michael Hooper

 

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Best Smartphone Apps For Trading Cryptocurrencies On The Move

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Who doesn’t like to trade Cryptocurrencies on the move!

Earlier, we had talked about some of the best Cryptocurrency exchanges globally, and many of our readers requested to do a post about those popular exchanges that offers an official mobile app to trade.

Personally, I also find a mobile app easier to exchange and trade cryptocurrencies even if we are not in front of our computer. That is why I am compiling a list of top cryptocurrency exchanges that offer a reliable, official mobile app.

Needless to say, I have tested them personally. It is only after being sure that they are worth the time am I featuring those here on CoinSutra.

So without further delay, let’s look at the mobile apps that will allow you to trade cryptocurrency from anywhere in the world on the go!

Here is the quick list:

  1. Gate.io 
  2. Binance
  3. Bitfinex
  4. KuCoin
  5. Cex.io

5 Most Popular Cryptocurrency trading exchanges offering mobile apps:

1. Binance

Binance mobile app

Binance is one of the fastest growing cryptocurrency trading exchange and looking at its rise and popularity, it won’t be too long before it surpasses the popularity of Bitfinex and Bittrex. You can read our full review of Binance here. Another reason users are loving Binance is its fully functional mobile app for both Android and iOS users.

Update: They also have a full fledge desktop app.

The reason Binance tops the list is that it supports many cryptocurrencies including BTC, ETH, NEO, XRP, XVG, IOTA, GAS and WTC to name a few. They keep adding new cryptocurrencies every few days and that is making it one of the most significantly growing cryptocurrency exchange out there.

Binance-mobile-trading-app

Another cool feature is that if you are a heavy trader, you should take advantage of BNB coins which are a native token of Binance. When you trade and pay the fees using BNB tokens, you save 50% on your trading fees. This is a considerable amount of saving when you are a day trader.

In fact, when you start using Binance, it is a good idea to buy BNB tokens first to lower down your cost in future trading. Sudhir has written a detailed guide on Binance token here.  The trade volume on Binance is huge and liquidating your assets is fast and easy.

Crypto-exchange-mobile-trading-app

To use the mobile app, you need to create an account on Binance for which you can register here. Once you are registered, you can download their iOS or Android app and start trading cryptos from your Smartphone.

 

2. Gate.io

In the first week of January 2018 popular exhcnages like Binance, Bitfinex, Bittrex have shut down new users registrations to maintain the quality of exchanges. This is when the Gate.io name popped up and after trying for almost 1 month, this exchange seemed to be a solid pick for 2018. The mobile app is fully functional and let you also add fiat money using AliPay account. You can trasde BTC, ETH, USDT, QTUM for any other crypto of your choice.

Join Gate.io

3. Bitfinex

Bitfinex

At the time of writing this, Bitfinex is world’s #1 exchange when it comes to volume of BTC/USD pair. They have a fantastic mobile app for iOS and Android.

Using the app, you can trade cryptocurrency and deposit funds to your Bitfinex account. Some of the popularly traded cryptocurrency on Bitfinex are Bitcoin, Ethereum, Ripple, IOTA, Monero, ZEC, DASH, OMG, NEO, QTUM, and many others.

Even though I like the Bitfinex website and use it often, my recommendation for you is to use it as a secondary option considering they don’t allow US citizens to register anymore and their alarming controversy with USDT.

One thing that anyone will particularly enjoy on Bitfinex is the quick liquidation. It does not matter what amount of Bitcoins you want to buy or sell, Bitfinex has you covered. The mobile app is easy to configure and use.

4. KuCoin

KuCoin is one of the newest and smartest cryptocurrency exchange. I have been using it for a while and they are similar to Binance but offers many unique features. The website is super fast and they have their own coin call $KCS.

Their mobile app is pretty solid and you will find all good coins on KuCoin. They are growing fast and it’s an exchange worth joining right now. They also offer GAS for holding NEO which is offered by only a few selected exchanges like this one.

Join KuCoin

5. CEX

CEX is one of our favorite picks as they allow buying cryptocurrency using a credit/debit card. In fact, it was one of the first few cryptocurrency exchanges that I started using.

They offer a fully functional Android and iOS mobile app that makes it easier for you to trade cryptocurrency.

CEX-App

Unlike Binance and Bitfinex, CEX has a limited number of cryptocurrencies which actually helps them to offer top notch service.

The cryptocurrencies they currently support are BTC, ETH, Dash, ZEC, XRP and BCH. There are plenty of options for the currency pair which many of you would enjoy.

You can also deposit and withdraw funds directly from the mobile app. The UI is very sleek, and CEX mobile app offers one of the best user experience while trading your cryptos on the Go!

Bonus: Mention worthy mobile trading apps

CoinTracking offers cryptocurrency management. It automatically pulls up your trade data from popular exchanges using API (Its secure) and let you monitor your current cryptocurrency portfolio right from the mobile phone. Something every serious Cryptocurrency investor and trader should use. The interface on desktop is not as modern as we expect it to be, but it does the job better than any other available options.

Even though this post is about official mobile apps, you should know about two more apps that lets you connect with other exchanges that don’t offer an official mobile app. For example, you can use Bittrex on the mobile phone using Tab-Trader and Ztrader app.

Tab-Trader is the most popular as it offers apps for both iOS and Android.

Tab-Trader also supports multiple exchanges such as Coinbase (GDAX), Bitstamp, ANXPRO, HitBtc, BTC-E, BTCChina, Huobi, Kraken, ItBit, Bitbay, Bter, Bitfinex, Bitmarket, Gatecoin, Bleutrade, QUOINE, Bittrex, BL3P (Bitonic), Poloniex, EXMO, Gemini, Vaultoro, Mercado Bitcoin.

Since you will be connecting to any app using API feature, just make sure you don’t have the withdrawal right to the newly generated API Key.

I understand that this may sound little technical for you now, but in the future, I will explain how to configure popular exchanges with Tab-trader or similar apps. But for now, go ahead and enjoy the top listed crypto trading mobile apps.

I would look forward to hearing from you on your pick of the mobile crypto trading apps.

Also, if you want to suggest any other app that is worthy of making into this list, do share that with me in the comments section below.

 

READ LATER - DOWNLOAD THIS POST AS PDF >> CLICK HERE <<

 

Best Smartphone Apps For Trading Cryptocurrencies On The Move was originally posted at https://coinsutra.com/best-smartphone-apps-trading-cryptocurrencies/ by Harsh Agrawal

 

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