Cryptocurrencies are volatile, and their wild shifts in value can make them difficult for novice investors to navigate. But they also have the potential to be highly profitable for those who can take advantage of market opportunities and keep an eye on the fundamentals.
First, it’s important to understand how cryptocurrencies are priced and traded. Like any other traded item, their value is determined by the quantity and quality of the units in circulation. And, just like stocks, they can be purchased and sold on the secondary market through exchanges. These can be centralized or decentralized, with some offering fiat gateways to allow users to buy and sell cryptocurrency using their local currency.
As the number of cryptocurrencies has exploded, so have the methods of financing their development and distribution. In addition to the traditional crowdfunding models, there are now new mechanisms such as airdrops and ICOs to get these tokens in the hands of investors. Some of these projects have the potential to revolutionize how financial infrastructure is funded, but others may be more speculative and prone to wild price fluctuations.
Once you have a clear understanding of how to purchase cryptocurrencies, it’s time to start looking at individual coins and their associated market capitalizations (or “market caps”). Each coin has a unique ticker symbol that can be found on the exchange platforms and in crypto news publications. Depending on the coin, a single unit can cost anywhere from a few cents to thousands of dollars.