Cryptocurrency has been getting more and more attention lately, but with that attention comes a lot of confusion about what cryptocurrency actually is, how it works, and whether or not you should invest in it.
If you’re thinking about investing in cryptocurrency, it’s important to understand the pros and cons of doing so before making an investment decision.
This article covers all three things so you can make an informed decision about whether or not you should invest in cryptocurrency as part of your financial plan.
What Is A Cryptocurrency?
Cryptocurrencies are digital money that is traded like stocks. It was originally created for people to buy drugs on the Internet (it's called the dark web currency), but it quickly evolved into a form of investment. Some currencies are better investments than others, which I will talk about below.
Investing in cryptocurrency is highly speculative which means there is always a possibility that you will lose everything if the company fails but the future looks promising.
The only difference between cryptocurrency and fiat currency is that cryptocurrency can be exchanged with other cryptocurrencies or digital currencies.
So far, there have been no failures in cryptocurrencies; However, as time goes on, more and more companies will appear in this industry, so be sure to do your research before buying anything!
There are many different types of cryptocurrencies: Bitcoin-centric currencies such as Ethereum or Litecoin; general purpose coins such as Ripple or Monero; App-specific coins such as Siacoin or Zcash; privacy coins such as Dash or Zcoin; Storage coins such as stratis or steam.
Keep in mind that some cryptocurrencies cannot yet be purchased through traditional exchanges due to regulatory issues, so they may require you to buy them directly from someone else.
pros and cons of Cryptocurrency
There are many potential benefits of cryptocurrency. Most people claim that this is the future of the financial industry.
Cryptocurrencies can be transferred without the need for a third-party financial institution, so it is much cheaper in terms of fees.
Others say that investing in cryptocurrencies is an excellent hedge against economic uncertainty such as global recession or periods of inflation because cryptocurrencies are known to rise during these periods.
However, there are also some downsides to investing in cryptocurrencies. One downside is that cryptocurrencies are viewed as a much riskier investment than stocks or other types of bonds.
Since they are new to the market, their value changes rapidly which makes them difficult to predict. Many investors who do not fully understand how Bitcoin works can get nervous when its value fluctuates frequently and unexpectedly.
Another issue with cryptocurrency is security. Some studies indicate that 8% of all bitcoins are stolen, which is equivalent to about $4 billion in stolen cryptocurrency if converted into US dollars.
Finally, if you want to invest in digital currency but don’t know where to start, this blog post has given you a general idea of how cryptocurrency works along with its advantages and disadvantages for investing.
Which crypto is best to invest?
Ethereum is the number 2 cryptocurrency with a market cap of $85 billion. It's seen some rapid growth in its trading volume with a 13% increase over the past 24 hours.
At the time of writing this paragraph Ethereum had increased to $700 per coin from $630, an 11% gain in less than 12 hours. One downside is that not all exchanges allow investors to trade for Ether coins making it hard to find exchanges that provide the opportunity for buying coins on margin or short selling.
As more people have become aware about Ethereum due to Bitcoin's fall in value there may be too much demand which would drive up prices even further.
If you are willing to risk more in return for higher potential gains then investing in cryptocurrencies such as Bitcoin may be something you should explore.
Is cryptocurrency is a good investment?
Cryptocurrency has seen a surge in interest lately due to its rapid increase in value over the past year. However, it's unclear how this trend will play out. Investments can be risky, but with care and research there are ways to lower the risk for investors.
Since cryptocurrency is still fairly new there is a lot more to learn about it before deciding on an investment strategy.
Investors should consider their comfort level with volatility, what their desired time horizon is, and the size of their portfolio when determining whether or not to invest in cryptocurrency.
If you're looking for a way to diversify your portfolio or want exposure to an asset that could appreciate significantly, then cryptocurrency may be worth considering as an investment option.
However, if you're uncomfortable with volatility or don't have the financial means for such investments then cryptocurrencies may not be for you.
But some might argue that investing early in crypto-currencies could mean huge profits down the line.
What is cryptocurrency and how it works?
- A cryptocurrency is a digital currency that is used to transfer money between two parties without having to go through a bank.
- Transactions are made using decentralized currency systems such as Bitcoin or Ethereum that allow peer-to-peer payments.
- These systems typically require no central authority to mediate the transaction, offer online security measures such as pseudonymized identifiers, and are often used in industries including online gambling.
- On the other hand, cryptocurrency is highly volatile since it is not regulated by any central authority; Thus many see cryptocurrencies as investments for speculators and not as currencies for everyday transactions.