I Want Cryptocurrency. Is It Worth The Risk?

Money is changing. The ways we buy, sell, save, and invest are evolving every day. Using cash is becoming less common and was even frowned upon by retailers and restaurants during the Covid pandemic. A hotly-debated digital alternative to cash is here: cryptocurrency.

1. Cryptocurrency defined

Simply put, these are assets that are produced via computer networking. Specialized software allows for safe ownership and trading.

The technology that underpins Bitcoin and many other cryptocurrencies is called blockchain, which retains a record of transactions and information regarding owners and what exactly they own. Decentralized public blockchains operate without the intervention of a central power, such as a government or bank.

To protect against fraud, programmers have implemented cryptography methods. These advances solve an issue that past attempts to establish fully digital currencies have run into: preventing users from duplicating their holdings and trying to spend them more than once.

Depending on how they’re utilized, individual cryptocurrency units are known as coins or tokens.

The technique of mining is one of the most popular ways that cryptocurrencies are generated. This is a time-consuming process wherein the computers solve complicated equations in order to validate the validity of network transactions. The owners of those machines may be rewarded with a freshly minted unit as a reward.

2. Buying cryptocurrency

There are a variety of methods available for purchasing crypto, but a centralized exchange is likely to be the most accessible for newbies. These exchanges generate money by selling crypto at market rates and charging service fees. Some online brokers give access to both cryptocurrency and equities if you prefer standard brokerage accounts.

Though exchanges are simple to use, the volume of crypto that passes through them makes them a tempting target for hackers.

3. Cryptocurrency options

• As of this writing, there are several choices if you wish to buy. Here are a few.
• Bitcoin is the original mainstream cryptocurrency.
• Ethereum is widely used to carry out more complicated financial transactions.
• Cardano competes with Ethereum and is headed by a co-founder.
• Solana is another Ethereum rival focusing on affordability and speed.
• Dogecoin wasn’t serious in the beginning but has grown to be a real player.
• Stablecoins are intended to remain more consistent in value compared to things like USD.

4. Cryptocurrency security

After purchasing a cryptocurrency, the next step is to figure out how you want to keep it.

This is a crucial decision. Your crypto has a private key, which proves you own it. This key is required for asset access and transactions. You will lose your cryptocurrency if you misplace your keys.

Most owners store their crypto on the exchange or platform used to purchase it, while others use a crypto wallet.

5. Cryptocurrency pros and cons

We’ve seen a lot of ups and downs in the news. Crypto owners have gained and lost billions the last few years. With value decreases and theft, crypto may appear to be a shaky investment.

Why do people like cryptocurrency?

• Cryptocurrencies are seen as the money of the future and buyers are rushing to acquire them now, hoping they grow in value.
• Some proponents prefer the idea of not having banks control the supply of money, because such institutions tend to devalue money through inflation.
• Others like crypto blockchain technology because it is potentially more secure than conventional payment systems.
• Some investors are interested in crypto value growth, but are less worried about whether or not crypto is adopted as a long-term means of money transfer.
• Through a practice known as staking, several cryptocurrencies allow their owners to receive passive income. This is the practice of using cryptocurrency to assist in verifying transactions on a blockchain. It carries risk, but it can build your crypto “portfolio” without having to acquire more.

Why is cryptocurrency risky?

• Some cryptocurrency ventures have yet to be thoroughly vetted and blockchain technology as a whole has yet to garner widespread acceptance. A long-term investor may never realize the rewards they hoped for if the basic principle behind cryptocurrencies doesn’t fully pan out.
• Hazards exist for short-term crypto investors as well. Values fluctuate swiftly and, although this has resulted in many individuals making quick money when buying at the right moment, it has resulted in many others losing money before a dramatic crypto crash.
• Such extreme price swings may also run counter to the underlying initiatives that cryptocurrencies were designed to address. People could be less willing to utilize a crypto payment mechanism if they are uncertain about its value from day to day.
• Mining techniques employed for crypto can have major environmental consequences. According to a study conducted by the University of Cambridge, global mining consumes over twice as much energy as all household lights in the United States. That said, some cryptocurrencies make use of less energy-intensive technologies.
• Governments across the globe are still figuring out how to deal with crypto, so changes and crackdowns might have an unanticipated impact on the market.

Still not sure what to do?

Regardless of how you look at it, cryptocurrency can be a precarious investment. High-risk assets should, in general, make up a modest portion of your entire portfolio. Experts often suggest only 5-10%. Remember the other important financial strategies which shouldn’t be neglected: bolstering your retirement savings, paying off debt, and/or investing in less volatile stock and bond funds.

Other investment alternatives to cryptocurrency include growth ETF’s (exchange-traded funds), dividend stocks, and small-cap stocks.

Take your time and do the groundwork. Learn as much as you can about your options, just like you would with other things in life. Consider getting worthwhile advice from an advisor who is experienced with financial planning and the ever changing world cryptocurrency.

Good luck in your crypto adventures!