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Cryptocurrency has been on the investing scene for a while, since the release of Bitcoin in 2009. Bitcoin is still the most popular cryptocurrency, and its name has become somewhat synonymous with cryptocurrency. But there are many other cryptocurrencies — over 9,000 at last count.
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Since the advent of Bitcoin, investing in cryptocurrency has moved from a venture shrouded in mystery and available only to a technically savvy few, to an easy-to-access and potentially profitable asset for the average investor.
Here’s what to know about building wealth with cryptocurrency in 2024.
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Understand What Cryptocurrency Is — And What It’s Not
Cryptocurrency is a decentralized currency that is digital and encrypted. It is not tied to any single country, or group of countries, like the U.S. dollar or the Euro. It uses blockchain technology to record and verify transactions, so theoretically, it cannot be forged, lost, or stolen.
Cryptocurrency is a volatile investment, so keep in mind that you could lose money in these transactions.
You Don’t Have to Buy Physical Bitcoin
In January 2024, the SEC approved Bitcoin ETFs. These funds hold bitcoin as the underlying asset, as opposed to previous crypto ETFs which used futures contracts. Buying spot Bitcoin ETFs means you can purchase shares of the ETF, which is backed by physical holdings of the cryptocurrency. The SEC is considering approving spot Ethereum ETFs next.
You can trade Bitcoin and other crypto ETFs in most brokerage accounts, so you may be able to do so in the account you already have.
Crypto Exchanges
You can also buy and sell cryptocurrencies on a crypto exchange. Coinbase is a common crypto exchange. To invest this way, you will be trading pairs of cryptocurrencies, similar to the way foreign exchange works with currency pairs. For example, you might trade Bitcoin for Dogecoin, or vice versa.
Cryptocurrency ETFs
If the idea of buying a single cryptocurrency is daunting to you, consider a cryptocurrency ETF. These funds do not hold physical cryptocurrencies but invest in futures. ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) is an example of this type of fund. Another option is Global X Blockchain ETF (BKCH) which holds Coinbase and other crypto exchange companies. These funds offer more diversity than spot ETFs.
Some crypto ETFs hold more than one cryptocurrency, which gives you more diversification than you would get by buying a fund that holds Bitcoin only.
Building Wealth with Cryptocurrency in 2024
Today, buying crypto is as easy as buying stocks, mutual funds, or ETFs. You can probably already buy crypto ETFs in your existing brokerage account. If you want to buy physical crypto, you can use a cryptocurrency exchange. Then it’s just a matter of managing your investment.
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Investing in crypto for the purpose of building wealth is guided by many of the same principles that stock market investors follow. Understand what you are buying (“Buy what you know,” as a certain successful investor would say), be patient, do your homework, and be rational. That’s the best way to build wealth, in 2024 and beyond.
This article originally appeared on GOBankingRates.com: A Beginners Guide to Cryptocurrency Wealth Building in 2024