Cryptocurrency has been in the limelight since its inception. It is just a few years old and has already generated a lot of hype. It is called the digital currency, digital money, virtual currency or simply Cryptocurrency. While Bitcoin was the first cryptocurrency, there are now more than 1700 Altcoins available in the market. Cryptocurrencies have become an investment opportunity for many and are trading at record prices. However, this level of interest comes with a lot of confusion too. Cryptocurrencies are not legal tender in most countries but rather a niche asset class with broad risk factors and little liquidity. Given their inherent nature as decentralized systems, understanding how they work and how to use them properly is key to making money from this exciting new asset class. Read on to know the difference between Bitcoin & Cryptocurrency
What is Bitcoin?
Bitcoin is a decentralized digital asset and a payment system invented by Satoshi Nakamoto. It is an open source protocol where all transactions are recorded and distributed across the network. This decentralization is what makes cryptocurrencies extremely difficult to regulate or tax. Bitcoin is a digital asset that is issued and used without physical exchange. It is an electronic currency that you can transfer directly between two parties without going through a third party like a bank or an exchange. It can be used to buy goods and services, but it is primarily used as an investment vehicle. Bitcoin is basically a software that runs on a blockchain network. This is a decentralized database that records all transactions across the network. Transactions are verified and recorded into blocks with each block holding a hash value that is linked to the previous block. This ensures that any change to the database is recorded and verified across the network.
What is Cryptocurrency?
Cryptocurrency is a digital asset that uses encryption techniques to create money that is controlled by computer code and is decentralized. You can buy some goods and services with it and exchange it for other currencies or use it to transfer money across the world instantly. The best thing about cryptocurrencies is that it’s completely digital and there’s no need for a bank to hold your money. You can hold it in your digital wallet and transfer it to anyone in the world with ease. Cryptocurrencies are traded across different exchanges, which can be a little complicated for a beginner. However, if you are tech-savvy, you can easily understand the process. The best thing about cryptocurrencies is that it is completely digital and there’s no need for a bank to hold your money. You can hold it in your digital wallet and transfer it to anyone in the world with ease.
If you are interested in investing in cryptocurrency, it is essential that you diversify your portfolio. Your crypto investments could be another piece in your well-diversified investment portfolio, helping you increase your overall returns, hopefully. First-time traders may enjoy our more in-depth guide to investing in crypto — which you will find scrolling below.
Differences Between Bitcoin and Cryptocurrency
Bitcoin is a cryptocurrency while, cryptocurrencies are a type of digital asset that uses encryption techniques to create a decentralized currency. Now, both Bitcoin and cryptocurrencies are decentralized and anonymous digital assets. However, there are some other key differences between Bitcoin and Cryptocurrency. Let’s look at those below: > Bitcoin is a cryptocurrency while, cryptocurrencies are a type of digital asset that uses encryption techniques to create a decentralized currency. > Bitcoin transactions are irreversible while, Cryptocurrencies are not issued by any government or central bank. > Bitcoin can be mined while, Cryptocurrencies are generated through a process called mining. > Bitcoin is decentralized while, Cryptocurrencies are not issued by any government or central bank.
How to Use Bitcoin in Trading?
Buying digital assets like Bitcoin is not a good idea. You can only use it as an investment and leave it untouched in your wallet. Now, the chances of you getting anything out of it are very low. You must have heard about the big investment funds investing in Bitcoin and making a fortune trading it. Yes, that too without even buying the digital asset. These investment funds are called hedge funds and are unregulated. They invest in Bitcoin and other cryptocurrencies and then hedge against losses by shorting the same. You can invest as little as $5000 and can get $100 million within a short period of time. They buy low and sell high, which is totally illegal but they don’t lose out on their investment. You can follow their trades and leave your wallet untouched.
For beginners looking to start trading cryptocurrency, though, the best advice is to start small and use only the amount of money that you can afford to lose. At the smallest trading size, $10, you could be investing in high-priced cryptos such as bitcoin and Ethereum — both are worth thousands of dollars a token right now. Investing in a portfolio of cryptocurrencies such as Bitcoin, Litecoin, and Ethereum is a good way to diversify income and protect yourself from economic uncertainties.
How to Safely store your digital assets
Investing in cryptocurrencies is extremely risky and can result in heavy losses. You should be very careful while investing your money in it. Let’s take a look at how you can safely store your digital assets. You should buy a funded, insured digital asset exchange account. You can transfer your Bitcoins to this account and send them to your digital wallet. You can buy or sell digital assets at any time and instantly. Bitcoin is not stored in any single server and is spread across a network of computers. Therefore, if one computer is hacked, you can easily transfer your Bitcoins to another computer. You also have the option of creating a cold wallet. A cold wallet is a digital asset that is stored offline and is not connected to the internet. You can store your digital asset in a USB or paper wallet. A paper wallet is a public key printed out on a piece of paper. You should keep this paper safely and offline so that no one can get access to it. A hot wallet is a computer connected to the internet and is vulnerable to hacking.
Conclusion
Now that you know the difference between Bitcoin and Cryptocurrency, let’s make sure you know how to use Bitcoin in trading. Buying Bitcoin without any understanding of how to use it in trading can result in heavy losses from investments. Investing in cryptocurrencies is extremely risky and can result in heavy losses. You should be very careful while investing your money in it. Bitcoin is a high-risk investment in the current market conditions and you should only invest what you can afford to lose. Buying Bitcoin is not a good idea. You can only use it as an investment and leave it untouched in your wallet. Now, the chances of you getting anything out of it are very low. You must have heard about the big investment funds investing in Bitcoin and making a fortune trading it. Yes, that too without even buying the digital asset. These investment funds are called hedge funds and are unregulated. They invest in Bitcoin and other cryptocurrencies and then hedge against losses by shorting the same. You can follow their trades and leave your wallet untouched.
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