Cryptocurrency is a digital based currency that is used to buy and sell goods but also trade for profit. I’m sure, most of you know someone who has invested in some version of cryptocurrency. They work using technology called blockchain, a decentralized technology spread across many computers and manages & records transactions. Most of the appeal of blockchain tech is the security.
There are more than 10,000 different cryptocurrencies that are traded publicly, it’s easy to see how that fact alone can make this type of currency confusing. Many believe the investment in crypto’s is mere speculation however, the supporters find it appealing for several reasons; they see the currency as the future and want to be invested from the ground floor, cryptocurrency removes central banks from managing the money supply, blockchain tech decentralizes processing and record keeping, and the obvious increase in valuations.
There are definite risks with cryptocurrency however, and they can go up and down in value. Also, just like ‘real’ currency they generate no cash flow, so for you to profit, someone must pay more for the currency of choice than you bought it for – there is no real profitability to relay on.
To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. Although, you can find exposure to the crypto markets through exchange offered companies such as Greyscale.
Cryptocurrency is an incredibly speculative and volatile buy. Stock trading of established companies is generally less risky than investing in cryptocurrencies such as Bitcoin. Additionally, they have the added risk from hackers which are not a typical risk for investing in stocks and funds on major exchanges.
It is believed that crypto can become on the wave of the future if, valuations can be stabilized but that would remove some of the appeal found in those currencies. Bottom-line, you must weigh the risks of the investment as you do with all of your investments.