The Basics about Cryptocurrency CTS

Crypto assets—as well as stocks, mutual funds and exchange-traded funds (ETFs) that derive value from crypto assets—may present the potential for price appreciation. However, while all investments have some risk, crypto assets and crypto asset service providers carry both traditional investing risks and additional unique risks. You should understand these risks as you consider what, if any, investments in crypto assets might be appropriate for your investment plans. Importantly, a particular crypto asset or crypto asset transaction may be a security, a commodity or another asset type (e.g., property) under applicable law. Many crypto assets lack, or are offered or sold in a manner that isn’t consistent with, the robust regulatory protections and market oversight that investors have under the federal securities laws. Whether a particular crypto asset or crypto asset transaction is a https://www.deviantart.com/bramridge-trust/journal/Bramridge-Trust-Review-2026-1316050516 security depends upon whether it meets the definition of a security under federal securities laws.

Learn risks, strategies, and opportunities to stay ahead in this evolving market. Although blockchain announcements are less frequent and happen with less fanfare than they did a few years ago, blockchain technology has the potential to result in a radically different competitive future. For a deeper understanding of digital assets, we recommend these resources.

Before You Invest in Crypto, Know the Risks

CUSIP Database provided by FactSet Research Systems Inc. SEC fillings and other documents provided by Quartr.© 2026 TradingView, Inc. Centralized NetworkA centralized network is a network configuration where participants must communicate with a central source to communicate with one another. Since all participants must go through a single centralized source, the loss of that source would prevent participants from communicating. Stocks, ETFs and other ETPs are securities and, as such, are regulated by the SEC.

• These risks have resulted in the collapse of some stablecoins.
• For example, the traditional U.S. currency is the U.S. dollar.
• For a deeper understanding of digital assets, we recommend these resources.
• Copyright © 2026 FactSet Research Systems Inc.Copyright © 2026, American Bankers Association.

These fees are generally paid to the persons who process the transactions and add them to the blockchain using the network’s native crypto asset. Initial Coin Offering (ICO)In an ICO, a company offers crypto assets for sale directly to investors and distributes the crypto assets via a blockchain network. Examples of native crypto assets include bitcoin and ether. From a business perspective, it’s helpful to think of blockchain technology as a type of next-generation business process improvement software.

A cryptocurrency is a medium of exchange such as the US dollar, but is digital and uses cryptographic techniques and its protocol to verify the transfer of funds and control the creation of monetary units. Cold StorageCold storage is a method of storing private keys for crypto assets in an environment that isn’t connected to the internet. Examples include storing keys on disconnected hard drives, printing or writing them on a piece of paper, or storing them on USB drives. BlockchainBlockchain is an electronic distributed ledger or list of entries that’s maintained by various participants in a network of computers. Blockchains use cryptography to process and verify transactions on the ledger.

Each block of new data is appended onto the previous block, forming a chain of blocks of data. StablecoinSo-called “stablecoins” are crypto assets that are claimed to have a value that’s pegged to some other non-digital currency or commodity; however, those claims have been demonstrated to be false in many cases. All investments carry risks, and crypto assets are no exception. Be mindful of the following realities of investing in the evolving world of crypto assets. A cryptocurrency is a digital currency, which is an alternative form of payment created using encryption algorithms.

Native Crypto Assets

Notably, some broker-dealers have established relationships with an affiliate or third party to enable customers of the broker-dealer to buy, sell and custody some crypto assets through this affiliate or third party. In these relationships, it’s important to know that these affiliates and third parties aren’t required to comply with the comprehensive regulations applicable to registered broker-dealers, and their customers don’t receive the same protections as customers of registered broker-dealers. Blockchain is the technology that enables the existence of cryptocurrency (among other things). Bitcoin is the name of the most recognized cryptocurrency, the one for which blockchain technology, as we currently know it, was created.

What makes crypto go up and down?

Cryptocurrency is a medium of exchange, created and stored electronically on the blockchain, using cryptographic techniques to verify the transfer of funds and an algorithm to control the creation of monetary units. AltcoinAltcoin is a term used to describe crypto assets other than bitcoin. There are thousands of altcoins in existence today, many with little or no market value. Buying and selling crypto assets can be both similar to and different from buying and selling stocks and bonds. Despite their name, stablecoins can pose risks for investors, including the potential for depegging (moving away) from the “stable” reference price (e.g., $1), cybersecurity risks, and risks specific to the type of stablecoin held. These risks have resulted in the collapse of some stablecoins.

A number of tests and factors, such as the Howey Test and Reves Test, both based on court cases, may be used in evaluating what is and isn’t a security. ExchangeIn the context of crypto assets, “exchanges” are crypto asset trading platforms that let users buy, sell, exchange and, in some cases, store cryptocurrencies or other digital assets. Crypto asset platforms might call themselves exchanges but don’t meet the regulatory standards applicable to national securities exchanges.

The use of encryption technologies means that cryptocurrencies function both as a currency and as a virtual accounting system. To use cryptocurrencies, you need a cryptocurrency wallet. These wallets can be software that is a cloud-based service or is stored on your computer or on your mobile device. The wallets are the tool through which you store your encryption keys that confirm your identity and link to your cryptocurrency. You have probably read about some of the most popular types of cryptocurrencies such as Bitcoin, Litecoin, and Ethereum. Cryptocurrencies are increasingly popular alternatives for online payments.