The world of cryptocurrency is a wild and dynamic one. While it may seem completely random, this field still relies on many traditional banking concepts.
From the ability to trade to the ability to save, crypto banking is the most modern iteration of doing business. Learning how to utilize your crypto banking account effectively means becoming familiar with new terminology and slightly different ways of doing business.
We’re going to break down crypto banking, the most commonly used services, and the terminology you need to be familiar with.
Defining Cryptocurrency
Let’s start small, so there’s no confusion. Cryptocurrency is a misunderstood term, often believed to be any form of digital money. This is far from the truth.
Cryptocurrency is a specific kind of digital money supported by a unique computer code, rather than controlled by a banking authority. Some of the most well-known forms of cryptocurrency today are:
- Ethereum
- Bitcoin
- Litecoin
- Cardano
- Dogecoin
Related: How to Buy a Banker With Coinbase or Binance
Defining Cryptocurrency Banking
Cryptocurrency banking (also known as crypto banking) is a somewhat misleading title. As we stated above, cryptocurrency doesn’t work exactly like a traditional bank.
Crypto banking is a broad term that refers to traders using cryptocurrency balances and digital wallets to manage their finances.
Traditional Banks Have More Consistent Oversight
A traditional bank will have a defined process that involves details like overdraft protection and accruing interest. This process comes with professional oversight that will help you out in a pinch.
Cryptocurrency has a little less oversight depending on the platform you use, meaning you’re taking on more risk as a trader. The increased freedom and flexibility of options you gain by using cryptocurrency offset this risk. We’ll explore this dynamic more as we go along.
Cryptocurrency Has More Variety in Funding
Cryptocurrency has literally thousands of different varieties, with new coins popping up every month. Unlike traditional money, you can make a lot of money or lose a lot of money in one fell swoop.
A traditional bank will only stock and use government-approved dollar systems, such as Euros or pesos.
What are the Unique Benefits of Crypto Banking?
Why would you go for crypto banking over making money the old-fashioned way? When it comes to freedom and flexibility, cryptocurrency is unparalleled.
You Can Use Crypto Banking as a Digital Wallet
Are you familiar with PayPal or CashApp? Online platforms have quickly risen up as alternatives to banks to give people the ability to make, send, and save money on their own terms.
Crypto banking functions similarly, allowing you to use your cryptocurrency platform as a digital wallet of sorts. This feature will enable you to make daily purchases using your cryptocurrency or send money to your friends.
Crypto Banking Has a Debit Card
A debit card is more reliable than a credit card because you only use the money you have. Crypto banking is the same way, allowing you to use your cryptocurrency balance in several locations.
You probably won’t be surprised to know that this feature wasn’t always available. Crypto banking is relatively new and, as such, is still evolving to become more accessible. Today more and more businesses are utilizing systems that automatically convert cryptocurrency into traditional money.
Related: Is Mainstream Crypto Adoption on the Horizon?
Can financial literacy and cutting-edge technology combine? We believe that everyone should be able to have the best of both worlds in the world of cryptocurrency.
What are the Downsides of Crypto Banking?
If only crypto banking was a flawless system! This innovative way of doing business comes with a few caveats you should be aware of.
Cryptocurrency is Highly Dynamic and Can Fail Anytime
Cryptocurrency has a few similarities to the traditional dollar. It responds to fluctuations in the market, but much more dramatically.
If you invest in a coin that eventually nosedives in demand? You’ll lose a lot of money and be unable to put your investment to any use. This lack of stability is pretty unappealing to people who want a time-proven method of making and saving money.
Cryptocurrency Fintechs are Still Evolving
Fintech is short for ‘financial technology’ and is a marvel of human ingenuity. Sadly, this system is also rather volatile and is subject to ever-changing rules.
Did you know Coinbase recently canceled a launch for a new lending product? This is due to their proposal clashing with the U.S. Securities and Exchange Commission. To this day, the details aren’t exactly precise as to which laws were being broached. As you can see, this is a big part of the problem.
Cryptocurrency is simply too new to have a reliable set of rules and standards. If you’re okay with unpredictability, this is one ride you won’t mind being on. If you’re nervous about a topsy-turvy market constantly coming up with new rules, cryptocurrency won’t be the most rewarding decision.
Cryptocurrency Taxes are Very Complicated
Tax season isn’t known for going easy on taxpayers. There are dozens of forms, new laws, and minor additions that even the best tax experts struggle to keep up with.
Cryptocurrency taxes are another level of complexity on an already overflowing pile. Your cryptocurrency liability is strictly your responsibility and should be carefully tracked with a spreadsheet or tax software. Consider hiring an accountant to help you out in this area.
Should I Try Crypto Banking?
Is crypto banking the solution for you? We’ll list a few questions to help you narrow down your next financial journey.
You Should Try Crypto Banking If…
You Want More Control Over Your Income
Have you ever wondered how much control over your income you could have? If you’ve been curious about how to boost your cash flow or learn about trading, cryptocurrency is a lucrative way to get started.
Cryptocurrency is highly rewarding for traders who keep an ear to the ground and aren’t afraid to take risks.
You Already Use Digital Banking Platforms
Are you comfortable using PayPal, CashApp, and Coinbase? All of these platforms have added features to make it easier to use and save cryptocurrency investments.
Coinbase has recently added a specialized debit card that offers rewards, similar to traditional banking.
You Should Not Try Crypto Banking If…
You Want Steady Cash Flow
Cryptocurrency is unpredictable at the best of times. At any moment your investment could suddenly dip and reduce your earning potential.
Cash flow is key for running a stable business and reducing stress in your life. While some traders enjoy the thrill of cryptocurrency, others may find the ups and downs tiresome.
You are Concerned About Developing Laws
Cryptocurrency has been tricky for local governments, tax collectors, and businesses. Traditionally making money is much more straightforward.
If you’re worried about stepping on legal toes with your cryptocurrency, it’s best to steer clear.
How Do I Start With Crypto Banking?
Are you thinking of diving into the complex world of trading and saving cryptocurrencies? We have a few steps to get you started on the right foot.
Step #1: Consider Your Crypto Platform
Not all cryptocurrency platforms are built the same. Some are better for beginners, such as Coinbase or Paypal. Others are better for more experienced users, such as Robinhood.
Remember that Paypal doesn’t let you withdraw crypto from the platform. You have to sell, then use your funds in another location. Little details like this can make or break your interest in the trade.
Step #2: Buy Your Coins
This is the most straightforward step, yet also the most daunting. To trade and invest in coins, you need to actually have some coins!
Your crypto wallet will hold all of your coins, which are usually provided by the crypto companies or platforms you use. Buying coins is as easy as choosing what money you’ll pay with, getting the equivalent amount in coins, and completing the sale.
Step #3: Learn From Others
There’s no shame in admitting you’re a little lost. Cryptocurrency isn’t very well-established compared to traditional money-making methods!
Reach out to peers in your network to learn tips and tricks on utilizing crypto banking. Ask them about their experience with cryptocurrency platforms, their pain points, and which investments have piqued their interest. You’ll be amazed at how much you learn in a short amount of time.
How Do I Start With Crypto Interest?
Another detail that is similar to traditional banking is crypto interest. If you want to generate a little passive income on your investments, this is the place to start.
Just remember there’s a bit of a twist. Let’s see what you should expect…
Breaking Down Crypto Interest Accounts
Cryptocurrency businesses that offer crypto interest accounts will borrow your money, loan it to others, then pay you a small amount of interest for your troubles. On the plus side, cryptocurrency interest rates are incredibly high. Expect to enjoy between 7% to 10% interest on average.
On the downside, you have…well, all the downsides we mentioned earlier. Cryptocurrency is constantly changing on a dime, which means you can go from making a lot of money to none at all overnight. If your cryptocurrency value drops too sharply, you’ll lose too much money to gain any interest.
Crypto Banking isn’t Always Safe
We explored above the lack of oversight on crypto banking. While cryptocurrency platforms offer some minor protection, you’re generally on your own.
What does this mean? For starters, cryptocurrency isn’t protected by the Federal Deposit Insurance Organization yet. That means if you buy cryptocurrency from a company that fails, you’ll get no monetary fallback.
While there are traders trying to get more legal oversight for their craft, the road ahead is a long one still. When you participate in cryptocurrency, it’s your responsibility to stay on top of changing laws and platform regulations.
Related: Unbanked Teams Up With Toys For Tots to Enable Crypto
Conclusion
Crypto banking can seem like anything but easy or simple. As it stands, this digital currency is still a fantastic way to increase your financial literacy and expand your money-making options.
Cryptocurrency is a type of digital currency that’s supported by unique computer codes instead of traditional banks or paper. Similar to the stock market, cryptocurrency sees its value rise and dip according to the market. Experimental, adventurous, and adaptable entrepreneurs love the dynamism of cryptocurrency.
On the flipside, cryptocurrency is extremely unpredictable and very convoluted. Because of its status as a new form of currency, laws change regularly. You’ll also have to do a new set of taxes for cryptocurrency and may lose a few coin values on your way to success.
Take a few moments to consider what you hope to achieve with your cryptocurrency career. With a little bravery and research, you could find the world of Bitcoin or Litecoin a very successful one, indeed.
Give your cryptocurrency career the best possible start. Contact us today to learn about today’s best fintech solutions.
