Crypto 101: a beginner’s guide to digital currency

USD finance professor shares insider knowledge

JESSICA MILLS / ASST. FEATURE EDITOR / THE USD VISTA

From trending TikTok videos to headline news, cryptocurrencies have remained a consistent topic of controversy and popularity. Many favor this new era of digital assets for its lack of government regulation and instantaneous nature, while others remain skeptical about a completely digital industry. 

Unlike transactions with physical currency, crypto involves sending virtual coins via electronic transfer. But, how does one value something that lives in cyberspace? As cryptocurrencies continue to trend, understanding the basics may prove beneficial. 

After working on Wall Street for 21 years, Clinical Professor of Finance Daniel Roccato shared insider knowledge on what he referred to as the “future of financial transactions.” 

“First, to simply explain it, cryptocurrency is a digital asset,” Roccato said. “It has value just like a dollar bill, but without the physicality.” 

While Bitcoin is a widely known form of crypto, there are numerous other currencies one can purchase as well, such as Ethereum and Solana. Each currency holds its own value based on the current market. The market is controlled by the buyers and sellers of said currencies, referred to as “traders.”

The price of these digital currencies fluctuate daily based on supply and demand: the more buyers, the higher the prices climb. For example, on Nov. 2021, one Bitcoin valued at an all time high of $68,000. Whereas on March 13, 2022, one Bitcoin valued at $38,700. 

There are varying reasons to invest in the world of cryptos. Professor Roccato explained the two main functions of cryptocurrency that foster this appeal.  

“They hold what’s referred to as transactional value,” Roccato said. “Just as one can use a debit card to purchase a coffee at Aroma’s, theoretically a cryptocurrency can do this too.”

Although, according to Roccato, we’re not quite there yet. 

“There aren’t many merchants that accept cryptocurrencies yet. But as we look into the future, more and more of our transactions will be done using these currencies.” 

The second function pertains to cryptocurrency’s “speculative nature.” 

“This is the idea that you can buy a crypto today and hope it goes up in value tomorrow,” Roccato said. “The vast majority of purchasing stock is speculative.” 

Overall, Roccato has found that traders invest in cryptocurrency for two main reasons. 

“One, it’s cheap. Two, it’s fast,” Roccato said.

Just as one may hold credit cards in their purse, cryptos are similarly stored in a digital wallet. 

“By opening a brokerage account you create a digital wallet,” Roccato said. “Today, this can be done on platforms like Paypal or Coinbase where traders buy and sell stock.” 

When depositing physical money from one account to another, a bank is required. This process normally takes multiple days to complete and a banker often takes a fee or commission as well. In the digital landscape of cryptos, selling and buying stock is instantaneous and controlled by the trader, cutting down on fees and time. 

For students interested in exploring the world of cryptos, Professor Roccato shared three tips. 

“Never use rent money,” Roccato said. “Use money you’re prepared to lose if the investment does not work. Stick with larger firms like Paypal and Coinbase when opening a brokerage account. Lastly, start with a few bucks and see where it goes from there, this is my top recommendation.”

Roccato noted that while he sees the benefits of investing, this is an industry riddled with scam. Although the transactions are not currently government regulated, he believes this will change in the near future.

Depositing Bitcoin into a bank account might not be an option today, but may be a real possibility in the future. While this is an industry that comes with risk and error, understanding the nature of cryptos may prove beneficial in the evolving world. Although cryptocurrency has come a long way since its inception, the new age of digital transactions is just getting started.