Expert: Here’s what you need to know about crypto

Cryptocurrency has grown in popularity in recent years, but many people still don’t understand it. A 2021 survey by found that 96% of Americans cannot pass a basic crypto literacy exam.

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Here’s what most people get wrong about crypto and what you need to know about this growing asset.

Bitcoin has a limited supply

Ninety percent of survey respondents did not understand the limited supply of bitcoin – a fact that Coinme co-founder and CEO Neil Bergquist believes is essential to know when it comes to crypto .

“There will never be more than 21 million bitcoins, and that creates a fixed supply and confidence in a fixed supply,” he said. “When people buy bitcoin, you’re buying from a limited supply, which is really the underlying principle of why people view it as a secure store of value. As we all know, dollars seem having an infinite supply because the government chooses to print more dollars, which devalues ​​the dollars in circulation, which is why we have inflation.

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There are different types of stablecoins

The survey found that 9 out of 10 people don’t understand stablecoins – digital assets that tie their value to an underlying asset.

“A lot of respondents didn’t understand what stablecoin is, let alone the differences between stablecoins,” Bergquist said.

Investors should be aware of the difference between an algorithmic stablecoin – like TerraUSD, which fell in value after breaking its peg to the US dollar in May – and a cash-backed stablecoin.

“Unfortunately, many people have learned the hard way that an algorithmic stablecoin is very different from a cash-backed or cash-equivalent stablecoin,” Bergquist said. “Understanding this, as we have seen in recent weeks, is also very important.”

Don’t rely on the advice of others when choosing your crypto investments

It’s tempting to follow the crypto advice you see on Reddit or social media, but Bergquist emphasizes the importance of doing your own research before investing.

“Learn about different cryptocurrencies, their liquidity and the size of their communities,” he said. “Generally, the larger and more credible the community, the more credible the cryptocurrency. So it’s always important to do your own research and not just follow what an influencer says or does, and be able to make that decision on your own.

This is especially true if you want to invest in more volatile coins.

“Large-cap cryptocurrencies like Bitcoin and Ethereum are generally considered the safest stores of value. If you want to speculate on some of the higher risk, higher volatility coins, it’s even more important to do your own research,” Bergquist said.

Along with doing research, Bergquist recommends starting with a small crypto investment to get your feet wet. Ownership is one of the best ways to learn about cryptocurrency – the survey found that respondents who owned cryptocurrencies were twice as likely to answer crypto literacy questions correctly.

“All you need is $1 to buy bitcoin at a Coinme-enabled Coinstar ATM, and then you can experience the wallet setup and that transaction experience,” Bergquist said. “What we learned is that people who own a cryptocurrency are more likely to learn about it and become more crypto savvy over the longer term.”

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This article originally appeared on Expert: Here’s What You Need to Know About Crypto

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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