Cryptocurrency, or crypto for short, is the broad category of digital currency that exists online instead of in a physical form like paper money or coins.
Bitcoin is one specific cryptocurrency. It’s the first one ever created, it’s the best-known, and it’s the largest by total value. It’s also widely seen as the easiest crypto to buy and sell.
A simple comparison is soda and Coke. Every Coke is a soda, but there are many more sodas besides Coke.
In the same way, all Bitcoin is crypto, but thousands of other cryptocurrencies exist. Ethereum, Solana, XRP, and Dogecoin are just a few, and each crypto comes with its own rules, purpose, and price.
What Makes Bitcoin Different
Many cryptocurrencies are designed to function as digital alternatives to cash, allowing one person to directly send online payments to another without going through a bank.
One of the main things that differentiates Bitcoin is its fixed supply of coins. Its code caps the total supply at 21 million, and that limit cannot be raised by any company or government.
Because of its fixed supply of coins, Bitcoin is often compared to “digital gold,” and some investors see it as an alternative to precious metals and a potential hedge against inflation.
Supporters also say Bitcoin is the most decentralized cryptocurrency. It has no central authority, such as a government or company, that can control the network.
It was released in 2009 by a person or group using the pseudonym Satoshi Nakamoto, and it runs on thousands of independently operated computers around the world. Known as “nodes,” they verify transactions and enforce the network's rules.
Many other cryptocurrencies work differently. Some have no hard supply cap, while others are controlled by a specific company, foundation, or founding team.
Because of its size, global adoption, and brand recognition, Bitcoin supporters believe it will continue to be the dominant crypto over time. That’s no guarantee it will prevail.
The Main Types of Other Crypto
Every other crypto that isn’t Bitcoin is called an alternative coin, or altcoin for short.
Ether
Ether is the second-largest cryptocurrency by market value. It’s the native crypto on the Ethereum network. Ethereum is designed to run smart contracts, which are small programs that automatically carry out actions once set conditions are met.
Those programs power apps for lending, trading, and other financial services that operate without a traditional company in the middle.
Stablecoins
Because crypto can be volatile, a stablecoin is a cryptocurrency designed to hold a steady value. It’s usually tied to a stable asset, such as the U.S. dollar or a commodity like gold.
Ideally, stablecoins should combine the fast transactions and low fees of crypto, while maintaining the stability of traditional currencies. They’re widely used in decentralized finance for trading, lending, and hedging against crypto market fluctuations.
Meme Coins
Meme coins are altcoins built mostly around novelties, jokes, or internet hype. Many trade in small volumes, swing wildly, and eventually become close to worthless.
Their prices often move on social media buzz and celebrity mentions, which makes them among the most unpredictable cryptos you can buy.
A History of Volatility
Bitcoin's long track record, huge number of holders, and simple design don’t make it a safe bet, and its price can swing sharply in short periods.
In November 2021, it reached almost $69,000. By November 2022, it had fallen below $16,000. That was a drop of more than 75% in about a year. If you’d invested $1,000 in Bitcoin at its November 2021 peak, your investment would have been worth less than $250 a year later.
A good rule to follow is to never invest more than you can afford to lose. Because of crypto’s history of volatility and its lack of financial backstops, it pays to be extra careful and start small.
Depending on your risk tolerance, many financial advisors recommend putting between 1% and 5% of your investable assets into cryptocurrency.
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How Beginners Usually Get Started
Most investors buy crypto through a crypto exchange, which is an app or website that works like a brokerage account for digital coins, letting you link a bank account and buy with dollars.
A more indirect option is a spot Bitcoin exchange-traded fund, or ETF, which is a fund that holds actual Bitcoin and trades like a stock in an ordinary brokerage account.
If you already have a brokerage, an ETF skips the need to create a crypto account, but it charges a yearly fee and doesn’t let you move or spend the coins yourself.
