Bazza06 wrote: ↑Thu Dec 30, 2021 12:30 pmVery simply, just like buying shares, if the value of the share/crypto increases from the price you bought at, you will see a gain in your original investment.Miopyk wrote: ↑Thu Dec 30, 2021 11:33 am Can someone explain how a crypto currency is able to generate a profit? What exactly is it invested in, how does it increase in value, who exactly controls them and how do hold them to account when things go wrong? I think I know the answers but would be interested to see if anyone else can tell me something I don't know.
Equally, if the price goes down, your original investment decreases.
Profit or losses are only realized when you sell.
You buy crypto through an exchange, similar to how you would buy a share through a broker.
The most common exchange is Coinbase which is a public listed company.
Their platform is easy to use, but their fees are amongst the highest.
It's a good starting point, though.
I use Binance, but you can no longer deposit funds from most UK banks. There are ways around it, but it's not for the beginner (neither is it illegal!).
Coinbase has its own insurance in the event something goes wrong. However, I am not au fait with the extent of this. I would imagine it is protection in the event they are hacked.
Similar to if a bank experienced similar and your funds were affected.
However, as with your bank details, passwords etc. you are responsible for keeping these secure.
In terms of controls, this depends on how and where you store the crypto you buy.
Some people keep it on the exchange, which is convenient to access but less secure if the exchange was hacked.
Others use "cold storage" in the form of a secure device such as Ledger (www.ledger.com). They transfer their crypto from the exchange to the Ledger device and keep it in a secure location of their choice.
These devices have a passphrase comprising a number of words that enable you to access your crypto should you lose or damage it.
However, anyone obtaining access to the passphrase can also gain access, hence the importance of keeping it secure.
YouTube is a hive of information for understanding crypto but beware of the many "influencers" promoting the next 10X, 50X, 100X wonder coin.
Just like the many forums of individuals promoting a small cap company that's going to be the next Apple, Amazon etc. they also exist in crypto.
The best channel for informative, balanced and educated content is the Coin Bureau (https://www.youtube.com/c/CoinBureau/videos)
His introductions as to how he is not a financial advisor have become legendary.
No one should invest in crypto without understanding the risks and volatility.
Everything you've said makes sense but you've not really answered my questions, how does a crypto make a profit? What does it do to generate value? If I buy stocks or shares I'm betting on the ability of the company I've invested in making a profit by conducting its business. Can you explain what a crypto does to do the same?