You’ve probably heard of cryptocurrency, but might not understand how it works. Essentially, cryptocurrencies are digital assets that use cryptography to secure transactions and create new units of the currency. Because these assets are decentralized (meaning they don’t have a central governing body), they can potentially be worth quite a bit in the future. As an investor, what should you know about investing in crypto currency?
The Pros of Crypto Currency
It’s Digital : One of my favorite things about cryptocurrency is that it exists only digitally. Unlike real-world currencies, there are no physical notes or bills. Instead, everything about cryptocurrency happens online. There’s no need for ATMs or even banks—as long as you have your computer and an internet connection, you can trade and spend digital coins wherever you want. Plus, digital currencies never wear out! They don’t get damaged by rain, rot in a vault or experience any other environmental factors; they just exist forever on computers across the world. No Printing Presses Needed: Another way cryptocurrency is different from traditional money? You won’t find any printing presses churning out physical money! This means there will never be more than a certain number of coins available at one time—no matter how much demand there may be for these currencies at certain times.
The Cons of Crypto Currency
Like any investment, there are cons to investing in crypto currency. For starters, most of us have heard about Bitcoin and other digital currencies being hacked. This means that if you choose to invest, you need a plan for how you’ll protect your assets. There is also an added cost associated with investing—you’ll need a wallet and you may incur transaction fees when trading. Then there’s volatility—the rate at which prices fluctuate over time. While some traditional investments (like stocks) can be somewhat stable, the value of digital coins can skyrocket or plummet overnight without warning or explanation.
Does All This Sound Too Good to Be True?
The truth is, though, that you won’t become a millionaire overnight. It takes time and patience to build a solid, long-term investment strategy—and if you’re jumping into cryptocurrencies hoping to strike it rich within months or even years, you’re probably setting yourself up for disappointment. But if you have realistic expectations of cryptocurrency returns and know how to manage risk with your investments (more on that later), there are indeed opportunities for substantial profits with crypto.
