The Skinny on Cryptocurrency

Cryptocurrencies like Bitcoin, Dogecoin and Ethereum have been making major waves in the investment world. Savvy investors with their finger on the pulse of that world have made millions on their investments. But investing in cryptocurrency is not for everyone. We’ll explore cryptocurrency and the pros and cons associated.

 

What is cryptocurrency?

Cryptocurrency is a digital currency used to buy and sell goods and services using an online ledger with cryptography to secure online transactions. Real currency can be traded for cryptocurrency or “tokens” that can be used to access those services and goods. Cryptocurrencies use a technology called blockchain. Blockchain is decentralized technology spread across many computers around the world that manage and record the transactions and keep the ledger.

 

There are currently nearly 7,000 different cryptocurrencies available for public trading. The total value of all cryptocurrencies is over $1.6 trillion. The most popular cryptocurrency is Bitcoin, with a value of nearly $60,000 for one Bitcoin (BTC)

 

Why are cryptocurrencies so popular?

Cryptocurrencies are popular because they are seen as the currency of the future. Some users love the fact that cryptocurrency removes central banks from the equation and the decentralized processing system can be more secure than traditional payment systems.

 

Is crytpocurrency a good investment?

Cryptocurrency can be a risky investment, and unless you are in a position that losing the money you invest won’t place you in a financially perilous position, it can be a dicey decision. Cryptocurrency is a volatile and unpredictable market. In 2017, Bitcoin was trading around $20k, but dropped to around $3k a year later, and currently it is at nearly $60k. Depending on the cryptocurrency you choose to invest in, you can purchase fractional shares. If you are looking to invest in cryptocurrency in an ICO, read the fine print carefully. Know who owns the company, who the major investors are, what your investment will gain you (stake in a company, currency or tokens). Even if the cryptocurrency is backed by legitimate and big name investors, it does not ensure that the cryptocurrency will perform well.

 

The risks and drawbacks

One of the biggest risks of cryptocurrency is the risk of theft by hackers. One high-profile exchange declared bankruptcy in 2014 when hackers stole hundreds of millions of dollars in bitcoins. Traditional investments hold significantly less risk. Another issue to keep in mind is the legality. Cryptocurrency is legal everywhere in the U.S, but China has banned virtually all cryptocurrencies. Check your local, state and federal laws before making any decisions.