What Are Cryptoassets? Understanding the Types and the Market
What if you were sleeping on a valuable investment opportunity?
Cryptocurrency has continued to gain value in remarkable and unexpected ways. For example, the value of Bitcoin increased by more than 400% in 2020 alone. Those who invested early in the year saw incredible potential profit by the time Christmas rolled around.
Unfortunately, many who would most benefit from crypto don’t understand how everything works. Many investors need help understanding basic concepts such as cryptoassets.
That all changes today. Keep reading to learn more about these assets, how they work, and why you should start investing in crypto today!
What Are Cryptoassets?
These are digital assets that employ different cryptographic techniques to facilitate financial transactions. Popular assets include security tokens, utility coins, and cryptocurrencies.
The word “crypto” means secret, referring to the ledgers and other technology used to secure crypto transactions. Many people prefer to pay and be paid in digital currencies because they consider these digital assets more secure than other forms of payment.
Are All Cryptoassets Cryptocurrencies?
Cryptocurrency is just one type of cryptoasset. Other assets may include security tokens and utility coins—nonetheless, many use “cryptoasset” and “cryptocurrency” interchangeably.
Why do so many use the terms interchangeably? One reason is that cryptocurrency has become the most popular type of digital asset. Now that “Bitcoin” has become a household name, more people know crypto as a currency. Still, fewer people understand the distinction between a digital currency and other digital assets.
Another reason we use the terms interchangeably is that there is little functional difference to the average investor. However, when accounting for different investments, a cryptoasset and a cryptocurrency are similar. Each is a digital asset we invest in, and we hope the investment grows in value.
What Makes An Asset "Crypto"?
Cryptoassets are created using cryptography and depend on blockchain technology rather than banks. While many cryptoassets are out there, they all depend on distributed ledger technology to manage different financial transactions.
What does “cryptography” mean? Basically, these assets are encrypted in a particular way. This encryption makes using these assets in financial transactions easy and safe. While cryptocurrency is becoming a popular investment, many crypto users rely on these assets daily to pay for goods and services and to be paid in return. To such users, crypto offers a way to pay and be paid without getting a bank or other third party involved.
How Does Someone Create Cryptocurrency?
Traditional cryptocurrency is a result of mining. For example, Bitcoin miners check network transactions, validate them using powerful computers, and receive new Bitcoins in exchange for their service. This process helps generate new coins while offering a powerful incentive for users to maintain the blockchain technology they rely on.
Speaking of the blockchain, it receives its name because data about validated transactions are recorded in blocks and added to the end of the digital ledger. Each block connects to the one before it, hence the term “blockchain.” Ultimately, this blockchain technology is why crypto is considered so secure. If someone wanted to falsify data on the blockchain, they would need a computer more powerful than the collective computing power of all the data miners put together!
Incidentally, many have expressed concerns about the environmental costs of crypto mining. But companies like Exxon and many others are looking into making the whole process more environmentally friendly.
Why Has Crypto Become So Popular?
Crypto has become popular in part because wise investors can sometimes grow their wealth in a short time. Additionally, crypto and related technology (like NFTs) are becoming popular among celebrities.
As we noted before, 2020 was a significant year for Bitcoin. While it has declined since then, Bitcoin’s value grew by 400% over a year. Many now point to this as an example of how savvy investors can make their fortunes via crypto. Additionally, more celebrities are endorsing crypto every day. For example, Matt Damon appears in commercials advertising crypto websites, and Kim Kardashian advertises EthereumMax on her Instagram. And now, everyone from Tom Brady to Gwyneth Paltrow and Paris Hilton is promoting the crypto-adjacent NFTs. These digital assets are more popular between the potential value of crypto investment and this onslaught of celebrity endorsement.
What Can I Buy With Crypto?
You can currently buy a variety of goods and services online using crypto. However, the cryptocurrency and the retailer determine precisely what you can buy. For example, you can use Bitcoin to buy certain goods and services from Microsoft, Newegg, and AT&T… Still, these retailers usually limit how you can use crypto (for example, Microsoft only allows cryptocurrency for online purchases on their site and not on their Xbox game system). And while these retailers accept Bitcoin, they will not necessarily accept other coins.
The good news is that many retailers and platforms accepting crypto are growing daily. A great example is that Paypal allows users to buy, sell, and hold onto different cryptoassets in their online accounts. So in time, there may be very few limits to what you can spend your cryptocurrency on.
Crypto; An Unpredictable Investment
If you plan to invest in crypto, one of the first things you should understand is that it is volatile. And some of the same things that make crypto an attractive investment also make it dangerous (at times) to invest in.
For example, we touched on how meteoric 2020 was for Bitcoin’s value. The pandemic drove Bitcoin’s value up by a staggering 416% by the end of the year. And investors thought the coin would soar even higher in 2021. The prices shot up at the beginning of 2021 but fell by 50% in the summer. The coin bounced back to an all-time high of $68,990.90 on November 10, but then it plummeted to $49,243.39 by the end of that year.
Overall, Bitcoin had dramatic peaks and valleys in value across 2020 and 2021 alone. So for a brave investor, there were plenty of opportunities to grow wealth using this particular type of crypto. However, the sheer volatility of Bitcoin as an investment shows this investment is not for the faint of heart!
How Many Cryptoassets Are Available?
There are over 17,000 types of cryptocurrencies. Currently, Bitcoin makes up nearly half of the market cap for crypto, and Ethereum makes up almost a quarter of that market cap. The sheer number of cryptocurrencies can be fairly intimidating for new crypto investors. And it can be challenging to pick an investment that will pay off.
For example, Bitcoin and Ethereum are considered safer investments because they are well-known and accepted in more places. However, this also means that these established coins are more expensive to invest in. Because of this, some investors prefer to focus on more affordable coins. Such coins are less adopted but more affordable and have great potential to grow; including popular meme coins like Dogecoin.
Benefits Of Crypto
On the fence about whether you want to try crypto? To help you decide, we have rounded up the different benefits of investing in and using cryptocurrency.
More Transparent
Many worry about the lack of transparency surrounding banks and other financial institutions. However, these institutions have thousands of employees, and working with them means trusting people who may be corrupt with your personal data.
You cut banks out of the picture when you buy and use crypto. You won’t have to rely on these institutions, employees, or intermediaries. Blockchain technology helps ensure that all your transactions are more transparent and protected than ever.
More Secure
We primarily worry about others stealing our personal data because it may be misused. For example, someone who gets access to your bank account may get away with stealing thousands of dollars. And in an age of sophisticated digital crime, you may never be able to find and punish the criminal.
However, the same blockchain technology that fuels crypto helps protect your information and transactions. As described before, the computing requirements needed to hack the blockchain make altering the data impossible. And the decentralized nature of this data storage further protects your information.
More Opportunity
As we touched on before, crypto is a very volatile market. But it also represents an unprecedented opportunity for investors to make much money quickly.
Crypto also plays a role in social media, with tweets from figures like Elon Musk affecting coin values. So if you stay on top of social media developments, it may suit you to navigate the opportunities that crypto offers.
More Convenient
If you are a veteran investor, you know how annoying it is to wait for NYSE NASDAQ to open before you can begin trading. But what if you didn’t have to wait to complete your transactions?
One of the things we love about crypto is that the markets never close. So you can conduct transactions 24/7, which is particularly convenient for night owls and anyone making their money moves after the rest of the world sleeps.
Drawbacks Of Crypto
We are obviously enthusiastic about crypto. However, no investment is one hundred percent safe. So before you dive into the cryptoasset market, you should know about some of the potential downsides.
More Risk
At this point, the volatility of crypto is an open secret. Nonetheless, that volatility remains the most significant risk of any cryptocurrency investment. This volatility is a “double-edged sword” for crypto investors. Yes, it presents great opportunities, but it also presents significant risks. If you are worried about what Keynes famously called the irrationality of the market, then something other than crypto may be the investment for you.
More To Learn
Part of what makes crypto so exciting is that it seems so new and exciting. But if you are new to crypto investing, that novelty is another double-edged sword.
Simply put, crypto has many quirks and complexities, and it will take you a long time to learn the specialized terms and technology. And it will take you even longer to get your bearings on how crypto investments differ from stock investments. While crypto is very rewarding for those who are very patient, the fact that crypt requires such patience in the first place is a major downside.
More Vulnerable
The next downside extends directly from the previous one. Basically, if you are new to crypto or not very tech-savvy, your investments may be more vulnerable. Make no mistake: blockchain technology is very secure, as is crypto. But every day, people lose coins because someone steals their private key. Moreover, you can lose these keys to phishing and other schemes. You will learn what these schemes are and how to avoid them in time. But if you are constantly worried about cybersecurity, the sheer prevalence of these schemes may discourage you from investing in crypto.
Crypto Access On The Go
Now you know all about cryptoassets. But to get the most out of these digital assets, you must learn about crypto “access.”
We have installed convenient Bitcoin ATMs nationwide to help you access crypto on the go. There are over 1,300 machines, meaning you can conduct important crypto transactions anywhere.
Ready to enjoy crypto like never before? Find the nearest Bitcoin ATM to get started!
