Should I Invest in Cryptocurrency?: 5 Important Facts You Should Know First
The Wild West has arrived on the Internet.
Cryptocurrency is a new frontier for business and financial innovations. It is an industry totaling well over 300 billion dollars in value.
But like the Wild West, cryptocurrency has plenty of dangers. Many people hear of crypto and ask, “Should I invest in cryptocurrency?”
Here are five facts that will help you answer that question.
1. Cryptocurrency Has Its Own Lingo
Cryptocurrency has its own language and procedures. Know them before you invest.
A cryptocurrency is a digital currency. “Crypto” comes from cryptography, the practice of writing codes. Cryptography secures cryptocurrency, protecting it with codes and computer networks.
A unit of cryptocurrency is called a coin. A coin is a unique line of code. You place your coins in a digital wallet, an account that is password-protected.
A blockchain is a digital receipt for a cryptocurrency exchange. Blockchains are long lines of code. These lines are stored on the Internet for public access.
Bitcoin is the most popular and longest-running cryptocurrency. Other cryptocurrencies include Ethereum and Dogecoin.
2. Crypto Is Unregulated
There is no central regulator for any cryptocurrency. Though websites publish blockchains, no one regulates cryptocurrency rates or exchanges.
The Internal Revenue Service does not define cryptocurrencies as currencies. The Securities and Exchange Commission does not provide regulations for cryptocurrencies.
Most financial advisors advise against investing in cryptocurrencies. Paul Krugman, a Nobel laureate in economics, even compares cryptocurrencies to Ponzi schemes.
You can still invest in crypto. But you are going into uncharted territory.
3. Cryptos Vary in Price
Cryptos have gained media attention for their high prices. But their prices change through time.
Bitcoin rose to almost $20,000 per coin in December 2017. That price fell to below $7,000 in less than three months.
Stock markets have been around for more than 200 years. The market provides a 10% annual return. Without a long history, it is hard to predict the returns from cryptocurrency.
4. Cryptos Are Not Well-Regarded
Cryptos have gained some mainstream support over the years. Whole Foods, Nordstrom, and Crate and Barrel are looking into accepting Bitcoin at their stores. Chief investment strategists like David Stein invest small amounts into cryptos.
But cryptos remain associated with criminal activity. More than 75 billion dollars of Bitcoin is used for illegal activity every year.
You can use Bitcoin for any purpose on the Internet. But be aware of its reputation. Keep your involvement in Bitcoin to yourself and a few associates.
5. Create a Diverse Portfolio
You should invest to create a diverse portfolio. Invest in stocks, real estate, and businesses. Build off of your 401(k) and retirement plan.
Crypto should be only a small part of your portfolio. Invest in cryptocurrency if you have some money you can afford to lose.
Invest in multiple currencies. Spread your assets around so you always have money at your disposal. Calculate for free on Calc2web.com to keep track of your assets.
“Should I Invest in Cryptocurrency?” It Depends
The Wild West of cryptocurrency is filled with opportunity and uncertainty. You may ask yourself, “Should I invest in cryptocurrency?” The answer is, “It depends.”
Understand the lingo and landscape before you invest. Remember that no one regulates crypto, and crypto varies in prices. Cryptos are not well-regarded amongst financial advisors and institutions.
Invest a small amount in crypto if you can handle the risk. Create a diverse portfolio. Finally, follow our website for more finance and technology content.