By Doug Young

What Is Cryptocurrency?

Because this asset class is so new, different and relatively unknown there is still a lot of confusion surrounding it. Investing in cryptocurrency brings with it a whole new learning curve.

A cryptocurrency (crypto) is a digital commodity designed to work as an anonymous exchange medium. Cryptocurrencies are commonly assumed to be currencies related to the internet. They use cryptography to verify and secure transactions and also to control the mining (creation) of new units of each cryptocurrency.

Cryptography makes it possible for information to be converted into uncrackable code which, in the case of cryptocurrencies, enables the tracking of transfers and purchases in a database that cannot be changed unless very specific conditions are met.

In line with digital technology, the process evolved with a combination of mathematical theory and computer science creating a secure way of storing communication, information and financial transactions online.

Cryptocurrencies are not printed like normal currencies since they are completely digital. They are created through computer systems using software designed to solve mathematical equations.

Also unlike normal currencies, they’re not controlled by Central Banks. It is because there is no centralisation, because there is no one central bank or large institution controlling them and because they are 100% open source that many people find investing in cryptocurrencies attractive.

Are Cryptocurrencies Legal?

is bitcoin legal

As cryptocurrencies are becoming increasingly mainstream, and as investing in cryptocurrency is becoming more popular, regulators, tax authorities and law enforcement agencies around the world and trying to get to grips with them and work out where they fit into existing regulations and legal infrastructures.

The introduction of Bitcoin, the pioneer cryptocurrency, created a brand new paradigm. Digital currencies or commodities which are decentralized, not controlled by any one central body, self sustained and don’t have any physical form were bound to become a nightmare for regulators.

Major concerns have arisen regarding the decentralized nature of cryptocurrencies and the way they can be used virtually anonymously. Authorities worldwide are worried about the appeal of cryptocurrency to illegal traders and the way it can potentially be used for money laundering and tax evasion.

The legality of cryptocurrencies depends on individual jurisdictions:
Wikipedia: Legality of Bitcoin By Country or Territory

Cryptocurrencies or Cryptocommodities?

There is widespread debate about whether cryptocurrencies are actually currencies at all. Some Central Banks around the world are refusing to accept Bitcoin or any Altcoins (all cryptos other than Bitcoin) as a currency for the very reason that if they do so they would then be forced to regulate them.

In reality cryptocurrencies are probably more like commodities, like gold and silver, than currencies. Hence certain Central Banks are making a stance and saying that as they don’t see cryptos as currencies they don’t see the need to licence or regulate them.

The United States has led the way for cryptos to be classed as commodities and this involves them being called cryptocommodities. That will force this asset class to have an actual classification, which it doesn’t have at the moment. Once it is officially classified it will enable regulators to come in and put proper licensing in place.

It’s still early days but already this is beginning to happen:

Federal Judge Rules Virtual Currencies Are Commodities Under the Commodity Exchange Act

This means that in time, most likely what are now referred to as cryptocurrencies will eventually be universally referred to as cryptocommodities. It also means that in time they will be fully classified, licensed and regulated.

For the time being however they don’t have a classification and they are still mainly unregulated and commonly known as cryptocurrencies, so we will continue to refer to investing in cryptocurrencies, as opposed to investing in cryptocommodities, throughout the rest of this article

The History of Cryptocurrency

Today, most people have heard of Bitcoins. Bitcoin was the first cryptocurrency.

Bitcoins were introduced in early 2009 by Satoshi Nakamoto. This was an alias for an anonymous individual programmer or a number of different programmers. Likening it to peer-to-peer file sharing networks, Bitcoin was described by Satoshi as an electronic cash system which was peer-to-peer.

He wanted to create a type of currency that was completely independent, one which was not controlled by an authority and which could be transferred instantly between accounts with little or no transaction fees.

Bitcoins are not printed, they are 100% digital and they are created (mined) by a community of people using computer technology. They are a payment network as well as a type of currency and they follow a protocol.

Part of this protocol is the rule that no more than 21 million bitcoins can ever be mined. It is, however, possible to divide a bitcoin into smaller pieces, the smallest being one hundred millionth of a bitcoin and known, after the founder, as a Satoshi.

Bitcoin and Altcoins are powered by Blockchain Technology. It’s relevant for anyone considering investing in cryptocurrencies to understand what this is since it’s the cryptocurrency engine room…

What Is Blockchain Technology?

blockchain technology

Cryptocurrencies are decentralised networks. In such networks each single component has to do its job. This is done through the Blockchain which is in effect a public ledger, available to everyone, of every transaction that has occurred within the network of events. Everything is transparent and irreversible.

Outside of the blockchain virtually all transactions are managed and overseen by a middleman. For example, when you use your debit or credit card to make a purchase you depend upon a payment processor or bank to progress and guarantee it. Similarly, when you send an instant message such as an email or SMS you depend upon the email or message provider to send it.

There are no middlemen with a blockchain. At the most basic level it’s a sophisticated database in which everyone using it, as opposed to one central authority such as a payment processor or bank, controls the distribution. It’s a sort of distributed ledger which in real time digitally records the transactions of all the computers in the chain, continually updating itself. The records cannot be altered or deleted without the agreement of all of those using the particular blockchain.

The benefits of a blockchain include:

  • It’s virtually impossible to hack a large number of computers which are not under singular, centralised control.
  • Encryption creates trust amongst users who have the confidence that no records can be tampered with.
  • Automation makes transaction times shorter.
  • Transaction costs are cheaper since there are no middlemen involved.

Blockchain technology is both flexible and diverse. Any type of asset, e.g. stocks, currencies or even property deeds can be put into the blockchain and programmed to react to certain triggers. In essence it’s doing the job of middlemen automatically, without any middlemen being involved. Examples would be making the transfer of an asset once payment has been made and received, or returning the asset to the seller if the buyer fails to make the payment.

It doesn’t even have to stop there. The process can be extended by linking the blockchain to the activities of another asset, for example it could be programmed to buy or sell shares in a company if its share price reaches certain levels.

What Can You Do With Cryptocurrencies?

Purchase Goods

Bitcoin accepted

Whereas in the past it was very difficult to find merchants who would accept cryptocurrencies, nowadays that is not so. There are now many merchants that accept payment in Bitcoin, ranging from large online retailers to bars, restaurants and local shops.

Other digital currencies aren’t as widely accepted just yet, but this is gradually beginning to change. For example Gift Card selling websites such as GiftOff have emerged which will accept many different types of cryptocurrencies. Via gift cards you can use cryptocurrencies to purchase pretty much anything.

There are Marketplaces such as OpenBazaar and bitify which accept payments in Bitcoin.

Accept As a Form of Payment (Businesses)

Business owners can tap into the ever increasing interest in cryptocurrencies by accepting them as a form of payment. It’s normal practice for them to put a sign up to let customers know that cryptocurrencies are accepted.

Payments can be processed through touch screen apps, hardware terminals or wallet addresses via QR codes. Services used to accept cryptocurrency payments include Bitpay (Bitcoins only), CoinPayments, Coingate and Cryptonator.

Business adoption of cryptocurrency is rising. There are rumours that blue chip merchants such as eBay and Amazon will soon begin to accept payment in cryptos.


Mining is a way of investing in cryptocurrency and many who latched onto this early have already made a lot of money.

Miners are integral to any cryptocurrency network. In essence, they provide book-keeping services for their various communities. Cryptocurrencies are created by solving complicated algorithms which create blocks that are added to the blockchain (public ledger).

Miners build this public ledger and as they create new blocks they are rewarded with new coins and a transaction fee. This gives the encouragement for more miners to participate and this is how the coin community grows.

In the beginning people could mine by simply using their home computers but as the algorithms have become more complicated mining has become much more difficult. The complexity of the algorithm increases as more people try to solve it, so as a cryptocurrency becomes more popular and more people attempt to mine it the more complicated the process becomes.

Nowadays to mine you’ll have to either invest in a custom built mining rig or join forces with a mining pool that harnesses the resources of many different computers.

Mining cryptocurrencies is effectively an arms race which is extremely competitive and where the winners are those who join the race early on.


Why Invest In Cryptocurrency?

Investing in cryptocurrencies is becoming increasingly popular. You can understand why when even the International Monetary Fund (IMF) is talking about them.

Just recently they suggested that “cryptocurrencies could potentially displace central banks at some point in the future”. Read article.

Potential Price Gains

If the IMF’s suggestion comes to fruition and if, say, Bitcoin were to replace central banks’ monetary reserves or become a dominant international trading currency then the value of one Bitcoin would be substantially more than its current value.

Investors who buy and hold Bitcoin now are sharing in this venture by, amongst other things, betting on future trends and changes in the global financial system.

As recently as the end of 2016 the price of Bitcoin was around $800. As at May 2019 it is around $8000 which is a ten fold increase. The rise in the price of Ethereum, which is probably the second most valued crypto, was even more profound during that period. Taking all cryptocurrencies together their market cap rocketed by more than 10,000% between mid 2103 and the end of 2017.

Institutional cryptocurrency investment could have a big impact on prices. So far institutions such as hedge funds and pension funds have been sitting on the sidelines but indications are that this is likely to change very soon. When it does and these institutions start pouring billions of dollars into the crypto market as predicted this is likely to induce a price hike. Read more.

Many industry experts are predicting that prices still have a long way to go:



In addition to potential price gains there are many other positive reasons for investing in cryptocurrency:

  • Age: Compared to most of the principal investment and asset classes cryptocurrencies are quite young, given that the first one, Bitcoin only came into being in 2009. This gives much potential for growth.
  • Technological advances: The modern day world is advancing and changing at a rapid pace as it is becoming increasingly digital. Cryptocurrency and blockchain technology are right in the midst of this and are well poised to be very much part of future technological developments and advancements. Their future is bright as they are swimming with the tide.
  • No political interference: As cryptocurrencies are not regulated by any central banks they are not at the mercy of any of them and cannot be interfered with by them. This gives cryptos a similar appeal to investors that gold and silver have. In fact some investors consider that investing in precious metals and investing in cryptocurrencies go hand in glove. Some refer to cryptocurrency as the ‘new gold’.
  • Anonymity: Investing in cryptocurrency often appeals to those who wish for privacy in their financial affairs. They offer you the opportunity to invest discreetly.
  • Supply and demand: As in the case of Bitcoins where there is both limited supply (the maximum number of them that can be produced is 21 million) and increasing demand, the laws of supply and demand dictate that prices will be pushed up over time. Ethereum is also limited, and these two are examples of how cryptocurrencies could eventually become more rare than gold, silver and other precious metals.
  • Safe haven appeal: Many investors are drawn to the safe haven comfort of gold in times of financial, economic and geopolitical crises. Cryptocurrencies, and particularly the two main ones Bitcoin and Ethereum which have fixed maximum quantities also offer a safe haven for investors when world governments react to crises by printing more and more worthless paper money. In such precarious times assets with limited quantities appeal to investors as they cannot be inflated. Hence the growing appeal of investing in cryptocurrency.
  • Hedge against declining fiat currencies: Whereas money printing by world governments inflates their currencies and therefore declines their value, the major cryptocurrencies like Bitcoin and Ethereum with limited supply cannot be inflated. Like gold therefore, they offer investors a hedge against the declining dollar and other fiat currencies.
  • Lower risk of failing: Many cryptocurrency investors are of the opinion that cryptos are less likely to fail than fiat currencies which are subject to government manipulation and potential hyperinflation.
  • No fees: Unlike with more traditional investment platforms there are no fees associated with cryptocurrency transactions.
  • Diversification: Diversity of assets is very important to investors. Investing in cryptocurrency offers you an additional asset class to include in your portfolio.

What Are The Top Cryptocurrencies To Invest In?


bitcoinThis is where it all started, back in 2009. Bitcoin is the biggest and most commonly used cryptocurrency today. It is widely chosen by investors as a long term store of value.

Unlike Euros or Dollars which are printed, Bitcoins are mined by users who solve complex mathematical equations on their computers and who are then compensated with new bitcoins in proportion to the amount of computer resources they contribute to the blockchain network.

The Bitcoin protocol ensures that there cannot ever be any more than 21 million mined (and maths indicates that this number will never actually be reached). The implication is that Bitcoin will never be subjected to inflation.


ethereumEthereum is much more than just a digital currency. Features include smart contracts and EVM – the Ethereum Virtual machine. The smart contracts feature is already being employed by major banks around the world. Furthermore it gives developers the ability to create applications which are decentralised.

Similarities to Bitcoin are that it’s a global network, blockchain based and also uses a currency of its own, known as Ether.

No main server, CPU power or memory is required as Ethereum functions through the connectivity of thousands of computers all round the world.


rippleRipple, also known as the Ripple Transaction Protocol (RTXP), is a protocol which allows almost instantaneous transactions and settlements at very low fees. A number of major banks implement Ripple in their systems. Unlike Bitcoin, Ripple is pre-mined and centralized.


litecoinLitecoin acts in many similar ways to Bitcoin and its low price in comparison makes it an attractive starting point for many just starting out on their journey into investing in cryptocurrencies.

It’s a peer-to-peer digital currency which is completely decentralized and which enables instant and virtually zero cost payments worldwide. The network is secured by mathematics just like Bitcoin, but offers faster transactions and superior storage efficiency.

It’s often said that Litecoin is to Bitcoin what silver is to gold.

Bitcoin Cash

bitcoin cashBitcoin Cash became a fork of Bitcoin in August 2017.

It is virtually identical to Bitcoin but with a block size limit of 8 megabytes many more transactions comparatively can be processed by its ledger.

Ethereum Classic

ethereum classicEthereum Classic is virtually the same as Ethereum. The split occurred after a decentralized part of the original one was hacked.

The main difference between the two is that Ethereum uses a new blockchain whereas Ethereum Classic uses the old one. A token of value named ‘classic ether’ is conveyed between Ethereum Classic participants.

What Are The Risks Involved In Investing In Cryptocurrency?

  • Volatility:

    Investing in cryptocurrencies can be a bumpy ride as their market values fluctuate more dramatically than any other assets. Any investors who bought Bitcoin at $800 at the end of 2016 will be very pleased with the current ten fold increase in their investment (as at May 2019). However those who bought in December 2017 when the price reached a high of around $19,000 will be very uncomfortable with the subsequent pull back.

  • Hacking:

    The more valuable that cryptocurrencies have become, especially the big ones like Bitcoin and Ethereum, the more hackers have emerged. They are attacking and robbing cryptocurrency investors by getting into their accounts. Even a few major exchanges have been hacked. Most people will have read about the Mt.Gox Hack in 2014 when $473 million was robbed and more recently the $530 million heist of the Japanese exchange Coincheck in January 2018.

  • Scams:

    A lot of junk Altcoins have emerged which are designed to rob you of your Bitcoins by direct trading of Bitcoin to those coins. Also many ICOs have emerged which have nothing to back them up.

  • Lack of regulations:

    The vast majority of cryptocurrency suppliers, even the big ones, are neither regulated nor licensed to supply cryptos. This is a grey area since potentially any of these could get outlawed and closed down at short notice. Should that be the case who knows where customers who have bought from them would stand? The more that funds move from the mainstream financial world into the crypto space the more governments and bankers are likely to attempt to stop this through restrictive regulations.

How Can You Mitigate The Risks Involved In Investing In Cryptocurrencies?

  • It’s advisable not to invest funds that you might need to liquidate any time soon so that you can ride out any dramatic price fluctuations that move against you. Also the adage ‘never invest what you can’t afford to lose’ is particularly relevant when investing in cryptocurrency.
  • It’s not unusual for cryptocurrency prices to double in a relatively short period of time. In that scenario you could consider withdrawing your original stake so that you are no longer exposed and you would thereafter just be risking the ‘market’s money’.
  • Do your due diligence. Before investing in a particular cryptocurrency check into its fundamentals rather than making a decision based on hype. Ask questions such as: Does the coin solve any issues? Is there any utility to it? Who are the developers and what are their credentials? Is there competition within the space and if so, how do their valuations compare?
  • Only buy from reputable sources and if possible, an officially regulated and licensed supplier.
  • Use cold storage. Irrespective of whether exchange platforms are at risk of being hacked or are simply facing struggles, if you hold significant amounts of cryptocurrencies it is far too risky to leave your coins on an exchange platform. Cold storage entails putting your cryptos onto a password protected offline (therefore unhackable) wallet (similar to a USB flash drive) and storing it somewhere secure (or preferably somewhere ultra secure).
  • Insure your cryptocurrency investments for full market value.

Disclaimer: We are obliged to remind you that all we are providing here is educational material. None of the content shown here constitutes financial advice and should not be taken as such. Always do your own research and consider consulting a financial advisor before making any investment decisions.

What Are The Experts Saying About Cryptocurrency?

Here’s what some of the GREATEST INNOVATORS OF MODERN TIMES are saying about cryptocurrencies:



And here’s what Sir Richard Branson thinks about Blockchain and Crypto:

Investing In Cryptocurrency vs Stock

Investing in cryptocurrencies directly is more like investing in physical gold or silver than in a regular stock. When you buy shares in a company you own a very small part of it but when you invest in cryptocurrencies you own digital tokens that serve varying purposes.

For example Bitcoin investors get a partially anonymous decentralized currency. Ethereum investors get a part of the power that runs smart contracts and decentralized apps.

How To Invest In Cryptocurrency

Cryptocurrency Investment Strategy

Decide upon your strategy. You can chose to invest in cryptocurrencies either indirectly or directly

Investing Indirectly:

Some people prefer to invest in Bitcoin indirectly and without having the hassle of storage, rather like investing in stocks and shares.

Bitcoin Investment Trust (BIT)

In the cryptocurrency arena the option of investing in stock isn’t available and the closest equivalent is to invest in an investment trust.

An investment trust issues a fixed number of shares when it launches and investors’ funds used to purchase these are pooled together, making it a type of collective investment.

With Bitcoin attracting so much interest everywhere the emergence of a Bitcoin focused investment trust was inevitable. Bitcoin Investment Trust (BIT) is the first US investment vehicle which is Bitcoin related and publicly traded.

It gives investors cryptocurrency exposure without having to physically buy or store them.

BIT is invested solely in Bitcoin and its value is derived exclusively from the BTC price. There is no diversification therefore so your investment stands or falls on the performance of Bitcoin alone. This means that with BIT you are not investing in cryptocurrencies collectively but instead just in the main one.

The trust is up 1600% in two years. Some view this as an excellent performance and others view it as a bubble about to burst. Most of those who think that its valuation is overinflated point to the fact that it’s the first of its kind.

While BIT is the only big player in the US at the moment, given the way the crypto market is evolving and the way investing in cryptocurrency is becoming increasingly popular it’s unlikely that it will stay that way for too long.

There are other investment vehicles available outside of the US which facilitate investing in cryptocurrency (just Bitcoin) indirectly without the need to store the cryptos. For example The XBT tracker is available on German and Swedish exchanges and the Bitcoin ETI is available in Germany and Gibraltar.

Futures Markets

Another means of investing in cryptocurrency indirectly is via futures markets where futures contracts can be bought or sold. It’s a matter of debate however whether this method should be classed as investing, trading or even gambling.

Since late 2017 Bitcoin futures have been traded on two futures markets, the CME Group exchange and the CBOE (Chicago Board Options Exchange). Both are long established and heavily regulated exchanges.

The advantage offered to investors is that as they don’t own Bitcoin itself there is no risk of it being hacked or stolen. The disadvantage is that for investors inexperienced in futures markets and trading it’s very risky because they are both complex and volatile.

Trading futures requires a deep understanding of things like time to expiry of contracts, volatility and ongoing fundamental news items. Traders need to be on top of these all the time and understand how such issues affect risks and returns, plus they need to be able to determine when to buy or sell at short notice. This is alien territory to most ordinary investors.

Investing Directly:

Investing in cryptocurrencies directly entails buying and possessing real cryptos which you will then need to store.

Smaller Sized Investments


When it comes to buying and possessing Bitcoins in relatively small quantities (in investment terms) there are many different options. Bitcoin ATMs are a good example. There are almost 1800 of them in 58 different countries. Additionally you can purchase BTC via gift cards and crypto exchanges and you can even engage in face to face trading.

There are many Bitcoin exchanges around the world. For example:

In the US: Coinbase, BitStamp, BitFinex, Gemini

In Canada: Coinsquare

In Europe: Kraken,

In Asia: OKCoin, BitFlyer, BTCChina


In respect of smaller investment quantities, there are less opportunities when it comes to investing in cryptocurrencies which aren’t as popular as BTC. Nevertheless there are still a number of exchanges where you can purchase various cryptocurrency coins with fiat currencies or Bitcoins. Purchase options vary according to the cryptocurrency type, how popular they are and your location.

Some of the larger exchanges like Kraken, BitStamp and BitFinex have more recently began listing some of the more popular Altcoins like Ethereum, Litecoin, Ripple and Monero.

It’s also possible to register at an Altcoin exchange which is a sort of crypto supermarket. Examples of these are Bittrex, Bithumb, Yunbi and Poloniex.

Larger Investments of $10,000+ (US Citizens Only)

Our recommended cryptocurrency supplier for serious investors is Regal Assets.

regal assets

Their head office is in Texas, USA. For comprehensive information about this company, including why we recommend them, please refer to our separate review:

Regal Assets Review

Cash Deals

US investors can purchase cryptocurrency from Regal Assets in quantities of $10,000 upwards, and with no upper limits. Regal supply many different types of cryptocurrencies, offering a wide choice to investors. This is not limited to just the main ones such as Bitcoin and Ethereum.

Their prime objective is to offer safe and secure investments for their customers. With that in mind they will (at your discretion):

  • load your cryptos onto a password protected offline wallet (rather like a flash drive) which cannot be hacked
  • arrange competitively priced ultra secure vaulted storage of your wallet
  • arrange insurance for full market value

You can contact Regal Assets USA regarding Cash Deals via their website

Crypto IRAs

Since December 2017 Regal Assets have been offering Crypto IRAs in the US. This is an extension of their award winning Gold IRA service which they very successfully built their reputation on. They started their business back in 2009 as precious metals dealers and cryptocurrencies were added to their product line more recently.

Putting cryptocurrency in retirement funds is fully approved by the IRS.

Advantages of a Crypto IRA include:

  • it facilitates investing in cryptocurrency without the need to employ new capital since you can switch over some of the existing funds already sitting in your retirement account.
  • it gives you a perfectly legal way to circumvent some of the restrictive and complicated tax regulations appertaining to cryptocurrency gains.
  • it gives you tax advantages.
  • there are no penalties.

The mininum investment is $10,000 just as with cash investments. If investing in cryptocurrencies via your retirement account is something that you would like to consider and learn more about then we recommend that you visit Regal Assets here to request one of their free Crypto IRA Investment Kits.

An additional benefit of doing so is that one of the Regal brokers will then call you to check your mailing address and that will give you the opportunity to ask any questions that you might have. All of the brokers are very experienced in cryptocurrencies, retirement funds and the associated tax benefits.

Contact Regal Assets regarding Crypto IRAs via their website

About the Author: Doug Young
Doug YoungDoug is a highly experienced professional and widely trusted authority in financial investing, commodity trading, and precious metals. With over 20 years of expertise, he helps others make informed decisions by sharing a combination of personal experience, extensive knowledge and meticulously researched information on gold IRAs, precious metals investing and retirement planning. He regularly writes news items on these topics. He has considerable experience of evaluating Gold IRA and Precious Metals Companies, gained over a period spanning more than a decade.

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