Cryptocurrency has been around for over 10 years and it refers to digital or virtual currencies. Bitcoin is the most well known and traded crypto, but there are now thousands of other cryptocurrencies in circulation. Recent surveys indicate that 100 million people worldwide own some type of cryptocurrency and the total value is over $2 trillion.
💡 Fun Facts…
| 1) Bitcoin was created in 2009 and has a limited supply of 21 million |
| 2) In 2010, a man paid 10,000 bitcoins for pizza, which would be worth $190 million today |
| 3) Binance is the largest crypto exchange in the world |
The concept of cryptocurrency is creating a decentralized financial system not controlled by governments, financial institutions, or other third parties. A main feature is the ability to bypass existing financial institutions and provide a more “open” financial model. It is all virtual and digital based, residing on computers and the cloud. Transactions get recorded on something called a blockchain, which is a digital record stored on computers around the world.
There are many advantages as well as some drawbacks and criticisms of cryptocurrency. A big advantage is the ability to conduct transactions easily and quickly across borders without the fees associated with traditional third party financial institutions. Traditional financial institutions often charge high fees for international money transfers, and transactions can be slow, often over days. Transactions with crypto are completed in minutes without the high fees normally associated with them. Another benefit is that it provides more privacy and security. Transactions and balances are stored on blockchains, which makes it difficult to hack or manipulate. Many cryptocurrencies employ technology to keep user information and transactions private and secure.
One of the downsides of cryptocurrency is that it has been used extensively on the “black market” for illegal transactions because it is typically untraceable. It is known to have been used for money laundering and terrorist activities. Another challenge is that it is not backed by any government or physical asset, so it tends to be highly volatile, with large swings in value.
Cryptocurrency is also a new and popular investment vehicle. It is considered a high risk investment because it is very volatile. There are some pros and cons to investing in crypto. Some of the pros include the potential for high returns as many cryptos have grown quickly in short periods of time. Because it’s decentralized and secure, many feel it is even more safe than other financial instruments. There are no high fees related to transactions, compared to other investments. And it’s highly accessible, with no need to go through a third-party broker. There are a wide variety of exchanges and wallets available.
Some of the drawbacks of investing in crypto include that it is highly risky, as prices tend to be very volatile, often for no clear reasons. Therefore, it is much more unpredictable compared to stocks or bonds. Investors can make big gains or suffer big losses in short time frames. Cryptocurrency is also unregulated, meaning investors may not have the same legal protections in case of theft or fraud. While crypto is secure, it is all digital so there is still potential for hacking or theft. And finally, in terms of currency, it is still not widely accepted as a form of payment in traditional markets.
What does the future of cryptocurrency hold? There is a strong possibility of government regulation of crypto around the world. They are beginning to see the potential dangers and risks of crypto and are looking into protecting people from potential financial losses. Innovation in the industry will continue, with new types of crypto being developed. There are already thousands of different cryptocurrencies and they all have unique features, capabilities and benefits. We will continue to see cryptocurrencies increase their user friendliness. Crypto is also being more widely adopted into the mainstream, where it was originally only utilized by a niche group of people. Beyond investing, some merchants and even banks have embraced crypto, and we are likely to see financial institutions create their own. There is also likely to be collaboration and partnerships in the industry. Right now, there’s a lot of competition in the industry, but there is a growing realization that working together can help the crypto markets grow overall.
OPINION
Cyrpto investing is not for the faint of heart! It’s highly risky and speculative. Unlike stocks, there’s no company behind the currency and the prices fluctuate rapidly up and down (called volatility), sometimes with no real reason. Many people have made a lot of money on crypto, but just as many have lost. Some people invest in crypto more for fun and excitement, but it is not wise to put all your investments into this vehicle. As with all investments, the younger you are, the more willing you are to take risks.
