a beginner’s guide to crypto and why you should care
When you hear the term ‘Crypto’ it can mean a lot of different things. For some it means Bitcoin, for others it means Dogecoin, NFTs, DeFi, and/or altcoins. One thing is for certain, crypto is a very misunderstood industry. The main reason crypto and Bitcoin is so misunderstood is because of the media. Media likes to exaggerate in order to make their headlines and stories more appealing and entertaining. In the end, their audiences end up confused, overwhelmed, and at best, intrigued. From the outside looking in, crypto has the appearance of sucking people in to either make them instant millionaires or instantly broke. Below I will provide the Beginner's Guide to Crypto.
Let’s start with Bitcoin! Bitcoin was the first cryptocurrency, and the entire industry follows the trend of Bitcoin up or down. The simplest premise for Bitcoin is the concept of hard money! Hard money is typically thought of as currency backed by hard materials like gold and silver, which are naturally scarce. Bitcoin is considered ‘hard money’ even though it isn’t physically hard or backed by anything, but because it is extremely scarce.
On the other hand, all the currencies used around the world are considered ‘fiat currencies’. Fiat currencies are not backed by anything except the recognition by the governments that produce them. The U.S. Dollar is not backed by anything, not even gold. The government and Federal Reserve can create as many Dollars as they want. This is how they’ve printed over $5 Trillion dollars over the last 2 years.
The concern when any government prints or creates a lot of new currency is that the value of that currency decreases because it’s less scarce. This is called inflation. You’ve probably heard many concerns about inflation as lumber, gas, and home prices have all skyrocketed recently.
Inflation is nothing new. In fact, the government targets an inflation rate of about 2% every year. As long as your income rises at least by 2% each year, you have nothing to worry about, you will be able to continue buying at the same rate you are accustomed to. But what happens if inflation rises 10% while your income stays at only 2%? It means that everything is about 8% more expensive than what it used to be and you can’t afford the same things you used to.
This is where Bitcoin comes in. There’s really just 3 things to know about Bitcoin:
- There will only ever be 21 Million coins that ever exist! This is the most fundamental key to understanding Bitcoin. Just like gold and silver are scarce, Bitcoin is even more scarce, because there are only 21 million coins that will ever exist. EVER! 18.5 Million coins have been created so far and the last coin will be release in the year 2140.
- No one can control or change Bitcoin! Thanks to blockchain technology, we don’t have to trust anyone or any organization to keep Bitcoin going and/or changing.
Blockchain is the underlying technology that distributes the power of control to all of its users. Since no one can change or control Bitcoin, we can be confident that there will never be more than 21 million Bitcoins.
- Adoption of Bitcoin continues to increase. Bitcoin has been around for almost 13 years now. Every year it gains more and more traction. Recently, Bitcoin has gained approval from public companies as they’ve decided to hold it on their balance sheets, governments (like El Salvador) are making Bitcoin legal tender, and hedge funds and big named investors are buying it as an inflation hedge.
For anyone new to Bitcoin these are the THREE most critical aspects to Bitcoin. It’s a simple function of supply and demand. The supply is fixed to 21 million coins. The question becomes will the demand continue to increase. If yes, the value of Bitcoins will increase.
Those that promote Bitcoin believe the demand for Bitcoin will continue to increase. Bitcoin and cryptocurrency adoption is similar to the adoption of the internet in the late 90s. Over the long term the number of users of Bitcoin is bound to increase.
Now, all the other cryptocurrencies are in a way like the many internet companies that were created in the early days of the internet. All are trying to solve different problems. Most will fail and the ones that remain will attract the most value and users.
As you determine if Bitcoin and other cryptocurrencies make sense in your investment portfolio, it’s important to keep things super simple. Only buy an amount that you are willing to lose. Be wary of anything or anyone promising a certain return. And think long term. Google, Amazon, and Facebook did not become tech giants overnight. The most proven strategy to win big in cryptocurrencies is to buy in small increments at a regular cadence and look to hold for 3+ years.
Now if you’re wondering where to buy Bitcoin, for simplicity’s sake, use Coinbase. They were recently listed on the New York Stock Exchange and have a long history of security and are easy to use.
If you’d like to learn more about Bitcoin and other ways to buy and store your coins safely, we have partnered with Uinta Crypto Consulting for a free training: How to Avoid The 3 Biggest Mistakes Crypto Investors Make. You can also reach out to their CEO, Spencer Montgomery at firstname.lastname@example.org.