There are many different types of investments to consider when looking to grow your money as you make your way through your financial career, such as stocks, mutual bonds, ETF’s, 401K retirement accounts and even real estate. One alternative investment type that not many consider is cryptocurrency. Cryptocurrency is another type of investment choice that has gained popularity since the early 2010s. To put this in perspective, one article written by CNBC said, “Nearly 40% of millennials and Gen Zers who own cryptocurrency plan to use it to make payments.” The question becomes, why would anyone consider investing in cryptocurrency? Before consideration, we must understand what cryptocurrency is, alongside the benefits and downsides.
What is Cryptocurrency?
According to Forbes, Cryptocurrency is described as "a digital, encrypted, and decentralized medium of exchange." As complex as it may sound, it is quite simple, the whole idea of cryptocurrency is based on the premise of providing an alternative form of payment. Most recently we have seen many businesses accept digital currency for various purchases. For example, Whole Foods accepts crypto payments for grocery purchases. Regal Cinemas accepts crypto payments for watching movies. Even Chipotle accepts crypto payments for food purchases. According to a CNBC article, “About 75% of them plan to begin accepting crypto or stablecoin payments within the next two years, according to a recent Deloitte survey.” Many retailers, restaurants, cinemas and other venues are now valuing cryptocurrency more than ever. This means that the dollar is slightly becoming less significant as its value heads on a steadfast decline.
What is the Most Popular Cryptocurrency & How Do I Access It?There many different digital currencies available to purchase and use, such as Bitcoin, Ethereum, Polygon, and Litecoin. However, for the purpose of this discussion we will focus on the two that are not only the most valuable, but also deemed the most profitable for both long term and short term investments. Starting with Bitcoin, this digital currency ranks number one as the most sought after long term investment coin in the market. Bitcoin is a decentralized digital currency that is primarily used as an alternative form for money. You can use it to pay for things and you can buy it to hold for as long as you want. The same goes for Ethereum, however this coin in particular has more utility to it because it serves as a way to buy items on the block chain which contains NFTs (non-fungible tokens). You can access both these digital coins on websites like Coinbase, Binance, eToro, Bitstamp and Gemini. For more information on how you can gain easy access to cryptocurrency, read this article here.
What are the Benefits & Downsides of Cryptocurrency?
With every investment opportunity there are many benefits as well as downsides. Some benefits include self-managed, security, easy exchange, and decentralization. Decentralization is the number one benefit among the variables. Digital currency monopoly is non-existent, meaning no single entity can influence the sequence and value of the currency like Bitcoin and Ethereum. This proves to be more effective than the United States Dollar, due to the nature of the dollar being heavily influenced and controlled by the government (federal reserve). On the other hand, as mentioned previously, there are downsides. One of them is data losses. This entails when individuals lose their secured password and or private encryption reference to access the cryptocurrency, and it is unrecoverable. The premise of this is to protect the integrity of the digital currency, which suggests that when individuals make accounts to buy and / or trade cryptocurrencies to make sure to save their access codes, once lost that is the end of accessing your cryptocurrency account. Another downside is that there are completely no take backs. This implies a no cancellation policy when investing in any digital currency like Bitcoin, Ethereum and so on and so forth. Accidentally sending digital currency for specific transactions cannot be recovered, even when dire mistakes are made. It is important to be aware of the nature of dealing with cryptocurrency when using it for trading and or buying potential.
How Do I Know Which Digital Currency is the Right Investment? How Do I Avoid the Bad Ones?The answer is continuous research for as long as you are interested and invested. Otherwise, investing in things based on speculation won't necessarily get you very far considering FOMO (Fear of Missing Out) risk would be at all time high. Understanding which cryptocurrencies to invest in is hard and there is not a concrete right answer. It depends on the nature in which you will go about using the digital currency. Whether it be trading daily, short and long term, it all requires different steps and preparation to make the initial steps. Every investment has a level of risk associated with it, and thus, acquiring knowledge on such ordeals help you prepare to mitigate it as much as possible.
The Bigger PictureLearning new investments can be difficult, but it doesn't have to be. It just requires patience and time. There is no need to rush - especially on something as controversial as cryptocurrency. Many experts have mentioned that Digital currencies are incredibly volatile. Jason Mitchell, the CTO of Smart Billions, a crypto website said, “Cryptocurrencies are becoming more and more integrated into our society with each passing day.” Even though they can be hard to understand right now, their usefulness continues to grow over the normal dollar today. Its ability to be independent from any governmental control and influence grants a unique kind of perpetuity.
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Your Financially Fit Team