Crypto Banking 101: Everything You Need to Know
13% of Americans traded with crypto during 2020 according to a recent survey.
Are you thinking about making an investment in cryptocurrency, but you aren’t sure if crypto banking is something you’ll be able to do on your own?
It can be a confusing topic, especially since investments in crypto are so much different than almost any other type of investment.
Keep reading below as we explore what crypto banking is, how it works, and more.
What Is Crypto Banking?
Crypto, which means the same thing as cryptocurrency, is a digitalized type of money that is supported by code rather than a banking authority. There are thousands of different types of cryptocurrency, but only a few of them have public interest, such as Bitcoin or Litecoin.
Crypto banking refers to managing these digital currencies with a financial services provider or a fintech firm. This can include making payments toward something, earning interest, or just holding your overall crypto balance.
The actual term “crypto banking” as a type of online banking is relatively new, and the way it will work for each individual depends on how they use and obtain their cryptocurrency.
Most people that get crypto do so by investing with the use of a trading platform. If you’re involved with crypto investing, you’ll be periodically buying and selling these currencies with “real” money backed by the Federal Reserve or another banking authority.
How Can You Begin?
The first thing to do is to obtain crypto with an investment. In order to do this, you’ll have to use a crypto wallet, which is the tool that will hold proof of your assets. Most companies that allow you to buy crypto will give you free wallets for your purchase, but it’s a good idea to do a little bit of research to make sure that you know what comes with your crypto.
Different companies, like ByteFederal, will allow you to withdraw your currency from an ATM if you purchase popular options like Bitcoin. These offer a convenient way to use your cryptocurrency in real-time.
Depending on where you buy crypto, the process is usually pretty straightforward. You will use your regular US dollars to purchase the digital currency of your choice. The amount of traditional money you spend translates to the equivalent of whatever the value of that currency is in the market.
After this, you will be able to look at your crypto balance just like you’d be able to view your regular, traditional money balance. Certain companies will also allow you to send and receive money from others within that same network as well.
It’s important to note that you need to be careful about where you actually get your cryptocurrency from. Some companies, for example, won’t allow you to use your crypto funds anywhere else unless you sell them first. Others will require that you wait for the company to confirm a purchase before it can actually go through.
How Legal Is This?
Cryptocurrency is completely legal in the United States. In other parts of the world, such as China or Australia, the laws are a little bit different. For instance, China has effectively banned the use of crypto altogether.
If you live in the US, you can buy and trade crypto without any worries. If you’re in a different country, however, it’s a good idea to do a little bit of research into the specific laws that your country has in place in regards to exchanging this type of currency.
You want to make sure that you’re living within the rules of law, but you also want to protect yourself from anyone that may be trying to scam you or commit fraud.
Is This a Smart Way to Use Your Money?
Cryptocurrency can be a great way to invest, but if you’re interested in it, you need to remember that the value of that currency can go up and down with much more volatility than traditional money.
They don’t generate any type of cash flow for you like a different investment might. If you’re going to profit from crypto investing, for example, you can only do that if someone else pays you more for the currency than what you paid for it originally.
In order for a currency to be successful, it needs to have stability so that people can determine how much things should cost in that currency. Otherwise, the prices won’t make a lot of sense because there is nothing to base them off and you may end up spending a lot more or less than what would really be fair.
In addition to this, the volatility in price makes it hard for people to feel comfortable spending the crypto. If it’s going to be worth a lot more next year, why would you want to spend it now? However, since people aren’t using it today, fewer of them are in circulation as a currency and this makes them more difficult to stabilize.
Crypto Banking: The Way of the Future
While it may not be the perfect move for everyone, crypto banking is a great way to make an investment and become part of a growing movement toward digital currency exchange.
As you can see, crypto banking is one of those things that are still not completely mainstream but are extremely likely to continue in growth in the coming years. As more people purchase and use crypto, more people will become interested in making that investment for themselves.
Did you find this article helpful? If so, be sure to take a look at some of our other fintech-related articles next.