I have noticed that a lot of people new to the crypto-currency world myself included are having trouble grasping the concept of this internet money and what, when, and how to use it. Per request of the homesteading slack community I participate in I have done some research and will give my shot at explaining it all in a way that homesteaders can understand. This is by no means an authority or professional financial advice, just my way of explaining and if you find incorrect information within I invite you to correct me in the comments below.

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Trading crypto-currencies and investing in them are 2 very different things so lets use some easy to understand examples to see how they work and for this group of people I will use chickens. Instead of crypto-currency names I will substitute breeds of chickens. In the crypto world Bitcoin, which I'm sure you've heard of is king. It is the most widely known and most valuable and all other "alt coins" are compared to that. Bitcoin's value is mostly mentioned as compared to the United States Dollar (USD), right now the price of 1 bitcoin is $4800. The point of having American dollars or your country's currency is to buy things like food and houses. Below are the substitutes I will be using:

Chickens - crypto coins
Leghorn - Bitcoin
Rhode Island Red - Steem (an alt coin)
goats - United states dollar

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the easier topic, investing in chickens

The point of investing is to put your money aside with the intent that it will grow in value after a given amount of time. In the homestead world be owning some chickens, putting them in a pin together and letting them forage, lay eggs, hatch, and raise chicks to start the process all over again. If you have some good chickens before you know it you will have a lot more than you started with. If you didn't know, some chickens are better than others at the process of making more chickens. Let's just say Leghorns are the best at that because they consistently make more and more chickens and the amount of chickens you have doubles every year, that makes it a good chicken to invest in.

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Like most type of standard investments like 401K or stocks/bonds you want your set aside money to gain interest on it's own so if the value does not increase, the amount you have will. In crypto currencies there are places you can lend your money and receive interest. This is achieved because you are loaning your money for someone else or a bot to trade your money and give you some of the profit on top of what you loaned them. One place to do that is bitconnect.com where you put your bitcoin in and let their bot trade your money. Do you research before giving away your money and make sure you know exactly where you are sending it!

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trading chickens

This is a bit more complicated and not as easy to explain. For our example here lets assume that Leghorn chickens are worth the most and everyone likes them, they are the most common chicken and the breed that all others are compared to. The amount someone would pay for a Leghorn chicken steadily goes up every year. Also know that to obtain things like food and cars and paying your bills you need goats to spend. Lets say that 10 Leghorn chickens are worth 1 goat and the only breed of chicken you can trade for goats is Leghorns. Since Leghorn chickens are worth the most of all the other chickens we will use them to base the price of all the other chickens. Different people have different ideas of what certain chickens are worth so the price of each one is different and it goes up and down all the time. The main idea in trading is that you end up with more leghorns in one day than you started out with.

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Today in the morning you are interested in Rhode Island Reds and you think that they will be worth more in the future so you trade 1 Leghorn for 5 Rhode Island Red. You wait a few days and now people are catching on to how great Rhode Island reds are and you are able to trade your 5 Rhode Island Red for 2 Leghorns. You have traded successfully and have more Leghorns than you started out with plus now the price of Leghorns has also gone up and you can trade one goat for 8 Leghorns. If you do this many times you will have increased your Leghorn chickens and now can trade for 2 goats!

You can either re use your profit or cashing out. Cashing out is nice short term because you can have instant tangible results. The probably more wise thing to do is re use your profit as trading. The more chickens you have to trade with the more profit you will make assuming you always buy low and sell high. As an example lets have 2 different people trade during the exact time. Bob has 10 leghorns and John has 100 Leghorns. They both trade all their Leghorn chickens for Rhode Island Reds at a price of 5 Rhode Island Reds for 1 Leghorns like before so Bob has 50 reds and John has 500. The price of Rhode Island Reds goes up after a few days again and they both trade back when the price is 5 reds for 2 Leghorns. That means Bob has 20 Leghorns now and John has 200. They both doubled their money but Bob only gained 10 chickens and John gained 100! The point is the more money you have going in and out of trades the more profit or loss you will have. There is always a risk in trading because you can never predict the price in the future, only have educated guesses. I recommend following @quickfingersluc and his trading method as it has worked for him for a long time and works for me as well. I am new to trading but really enjoy it.

This is an example of a price chart, specifically BTC/USD (bitcoins price compared to United States Dollar) The numbers below are the days in August. You can see all the ups and downs in the price and where you could buy when it was low and sell a little later for a higher price.

Thank you for reading, I hope this helped answer some questions in the homesteading community. I'd be happy to answer questions in the comments or on the slack channel, click the steemit homesteadsers logo below to join.