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Completely new to the world of Crypto. I have a newbie question in how it works

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by COINS NEWS 114 Views

Hi, all! I hope you'll go easy on me and my not-so-intellegent question incoming, and I hope you'll help me understand with simple explainations, as I'm not the brightest at economics yet :)

I'm all new to Crypto and just want to learn :) I downloaded Binance just so I can watch different currencies go up and down in value to get an idea of how things work, without buying anything yet.

But I have 2 burning questions.

1: I just want a yes or no if I've got these basics right or not. So as far as I understand, Crypto Currencies are a type of digital currencies that created by non-goverment organizations or individuals, and some currencies have uses already (like Bitcoin) while others don't. They go up and down in value due to many factors, but mainly it's the interest and request and quantity that all play in. When you invest, you buy a token or parts of a token, which you at any time can sell back to the distributer. Which means, to take a very simple example: If one Bitcoin had costed 100$, and I buy 1, and then the value of it increases by 10%, and then I sell it, I'll have made 10$ in profit. Is this all on the right track?

2: Value increase. I'm a bit torn on how this exactly works. Because, nowdays a Bitcoin is worth around 16k $, rounding it down. But as an example, let's say a Bitcoin is with 1k $. If I invest with 1k I'll own one single Bitcoin. If the Bitcoin value increases to 2k, aka a 100% increase, I'll now own 2k $ and will have made 1k $ in profit. That's easy to grasp, however: What if I only invest with 10$? Then I'll own 0,01 Bitcoins. If the value then increases by 100% (from 1k to 2k), that's the increase for one Bitcoin, isn't it? So since I only own 0,01 coins, how will that work? Will it still be a 100% increase for me, aka I will still own 1% of a 2k$ coin, so my 10$ investment will increase by 100% to 20$? Or will it only increase by the amount of Bitcoins I have, if that makes sense? I mean, if a single coin goes up 100%, and I own 1% of a coin, doesn't that mean the value increase also will only be 1% instead of 100%?

This is what confuses me. If I should think in % increase or raw number increase. Because, as far as I understand, if it's % based, the quantity of tokens matter. If I own a full token, the increase in value will be greater than if I own 1/100th of a token. However, if it's raw number increase that matters, does it really matter when I invest? They say you should invest when a currency is at its cheapest, but why? If I invest with, say, 100$ and the value of Bitcoin increases by 50$, then that will be the case no matter if a Bitcoin costed 1$ or 1 million $ when I invested. So which one is it?

Sorry if the questions are badly formulated, but I hope it made sense.

submitted by /u/WwwWario
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