Different types of crypto assets have different uses and characteristics. They may be used as a way to pay for things, to store value (like an investment), or as a tool for business or technology projects.
Some common crypto assets include:
Crypto currency
Value-referenced crypto assets (sometimes called stablecoins)
Non-fungible tokens (NFTs)
Utility or Security Tokens
Unlike Canadian dollars, crypto assets aren’t backed by a government or central bank. That means their value can change quickly.
Learn more about different types of crypto assets
A distributed ledger is a shared database that lives across a network of computers. No single person or company controls it.
Blockchain is one type of distributed ledger that stores data in chunks (called blocks) and links them together, like a chain. Think of blockchain as a shared online record book. Every page in the book is a block of data. When a new page is filled, it’s added to the book in order, creating a chain of pages. Once something is written, it can’t be erased or changed. That makes it secure, but also hard to fix if something goes wrong.
You can trade crypto assets on the blockchain or through a registered crypto asset trading platform (sometimes called a crypto exchange). These platforms let you buy and sell crypto online. Another option is investing through a fund that holds crypto assets, similar to the way you may invest in a traditional ETF or Index Fund.
Learn more about buying and selling on crypto trading platforms
Investing in crypto isn’t just about understanding the technology. Like any investment, it needs to fit your long-term plan and match your comfort with risk.
Before you buy, ask yourself:
Why do I want to invest in crypto? Is it curiosity? FOMO (fear of missing out)? A desire for control over your portfolio? And is the DIY route right for me?
Do I understand the risks of crypto investing? Crypto is highly volatile, meaning prices can swing fast. If you’re comfortable with high risk, put some guardrails in place like setting limits on how much you’ll invest in a speculative investment and diversify so you’re not putting everything into one basket.
Am I ready for the emotional side? Selling too early or holding too long can lead to regret or play on your pride, even when it hurts our wallets.
Am I willing and have the time to learn? Successful investing takes time and planning. You’ll need to put in the time to build a long-term plan, learn about the assets and understand how each fit into your personal investment strategy.