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Bitcoin is the most valuable cryptocurrency on the market, and many investors are starting to take notice.
But taking the first step towards investing can be more confusing than you might think thanks to another popular cryptocurrency that shares the Bitcoin name: Bitcoin Cash. These cryptocurrencies are different, despite the similarities in name.
Since experts say you should stick with Bitcoin and Ethereum as long-term investments, it’s important not to confuse Bitcoin Cash with the original Bitcoin. Here is some basic information on both:
What is Bitcoin
Bitcoin is the first cryptocurrency, launched in 2009 by a pseudonym named Satoshi Nakomoto. Its price has fluctuated over the past year, from lows of around $ 10,000 per coin to highs of over $ 60,000.
Bitcoin was originally intended to be a peer-to-peer electronic payment system that you would use to make payments. However, due to slow processing and volatility, “Bitcoin is actually not very easy to use when it comes to payments,” says Kiana Danial, author of “Cryptocurrency Investing for Dummies”. Because of this, Bitcoin’s original intention was pretty much abandoned from the start.
Instead of making payments over the internet using Bitcoin, people would buy and hold coins in the hope that they would increase in value over time, much like some people hold gold.
But a group of Bitcoin users in 2017 wanted to improve Bitcoin’s ability to process transactions and make it easier to use the cryptocurrency for its original intent as a peer-to-peer electronic payment system. Enter: Bitcoin Cash
What is Bitcoin Cash
Bitcoin Cash was driven by the desire for “other crypto assets and cryptocurrencies optimized for real payments,” Danial explains. “Bitcoin Cash literally came out of Bitcoin for this reason.”
If a group of developers want to change any aspect of a current crypto, they can split or fork the blockchain they live on. Forking takes the master code of an existing cryptocurrency, like Bitcoin, and then adds or modifies it slightly so that it becomes its own separate entity.
But even though Bitcoin Cash was developed to serve as an electronic cash payment system, it has experienced much of the same volatility that holds back Bitcoin’s potential as true currency. Volatility is why you need to be especially careful when using either currency to make payments (in fact, we recommend that you don’t).
Imagine paying for a $ 5 coffee with any cryptocurrency, and tomorrow that same amount of crypto is worth $ 20. This volatility could result in a loss for you. Additionally, while you don’t need to report crypto purchases to the IRS, you do need to do so when exchanging crypto for goods and services, which requires additional diligence on your part.
[READ MORE]: You can buy more things than ever with Crypto. Here’s why you shouldn’t
Bitcoin vs Bitcoin Cash: What Should You Buy?
BEFORE INVESTING IN CRYPTO
Experts say it’s smart to keep your crypto investments under 5% of your overall portfolio. Crypto prices fluctuate wildly from day to day, and experts also say it would be wise not to invest more than what you would be willing to lose if the market collapsed completely. Crypto investments should also never hamper other financial priorities such as saving for emergencies, paying off high interest debt, and saving for retirement using more conventional investment strategies.
Investment experts recommend sticking with the two most well-known cryptocurrencies, Bitcoin and Ethereum, and transmitting other altcoins, including Bitcoin Cash.
“Personally, I don’t go beyond Bitcoin and / or Ethereum,” Michael Kelly, CFA at Switchback Financial, recently told NextAdvisor. “I think these two have a little more of an established base and I think the risk of other parts is getting too great.”
There are thousands of different cryptocurrencies on the market, and most have very little value and uncertain potential for value growth in the future. So even though Bitcoin Cash shares its name, experts say investors should take a pass and stick with Bitcoin.
| Bitcoin | Bitcoin Cash | |
|---|---|---|
| Created | 2009 | 2017 |
| High price 2021 | $ 64,801 | $ 1,641 |
| Low price 2021 | $ 9,868 | $ 333 |
| Market capitalization | $ 951.6 billion | $ 13.8 billion |
Which is more valuable: Bitcoin or Bitcoin Cash?
Bitcoin was launched in 2009 and has grown from $ 0 to over $ 60,000 over its lifetime, although the ride has been anything but smooth. This year alone, Bitcoin hit its all-time high price of just over $ 60,000, then quickly lost 50% of that value over the following weeks.
Bitcoin Cash has only been available since 2017, but has an equally rocky price history. It peaked shortly after its launch at around $ 3,785 per coin, although the price has fluctuated between around $ 200 and $ 1,600 over the past year.
In either case, it’s also important to remember that Bitcoin and Bitcoin Cash are only valuable because people think they have it. Cryptocurrencies are not tied to any other asset class or company, which makes them highly speculative and volatile – this is all part of the reason you should never invest more than 5% of your total portfolio in the cryptocurrency and invest only what you are willing to lose.
How to buy Bitcoin or Bitcoin Cash
While experts say investors should stick with Bitcoin, the buying process is essentially the same:
- Choose one cryptocurrency exchange: You cannot buy cryptocurrency through a traditional brokerage house or your bank, so you will need to access a specific cryptocurrency exchange like Coinbase or Gemini.
- Fund your account: You will need to connect your bank account or debit card to transfer funds to the cryptocurrency exchange of your choice.
- Order: Once your payment method is in place, place your order. You can indicate how much you want to buy in USD or in crypto. Most people will likely buy fractions of a single coin because they are so expensive.
- Store your crypto: For smaller amounts of crypto, you can keep it directly in your exchange. But a crypto wallet will offer more security if you have large amounts of crypto and want the extra security that can come with it.
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