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What Is Cryptocurrency? Is Cryptocurrency Good for Investment?
A cryptocurrency (or simply “crypto”) refers to a digital currency. The currency that used to purchase goods, aquire services or it can be used as a “gas fee” to secure transactions on blockchain. Many people are interested in these unregulated currencies because they can be traded for profit. Sometimes, however, the prices go skywards due to speculators.
Bitcoin, the most popular cryptocurrency, has seen volatile price movements this year. It reached nearly $65,000 in April and then lost nearly half of its value in May.
These are several questions to ask about cryptocurrency and the things to be aware of.
1. What is cryptocurrency?
The cryptocurrency is an online payment system that can be used to exchange for goods or services. Many companies have their own currencies, sometimes called tokens. These can be used to trade for specific goods or services. These currencies can be thought of as casino chips or arcade tokens. To access the service or good, you will need to exchange cryptocurrency for real currency.
Blockchain technology is used to create cryptocurrencies. Blockchain is a decentralized technology used to record and manage transactions. It can be spread across many computers. This technology’s security is a major draw.
2. Is cryptocurrency secure?
While cryptocurrency is not completely safe at the moment, there are signs that it will be around for a while.
a). Risks need to be addressed
More than stock exchanges are, cryptocurrency exchanges are more vulnerable to hacking and become targets for criminal activity. Investors who have lost their digital currency have suffered significant losses due to these security breaches.
It is more difficult to store cryptocurrencies safely than holding stocks or bonds. There are many cryptocurrency exchanges like Binance Exchange and Coinbase. It is easy to purchase and sell crypto assets like Bitcoin And Ethereum. But there are many People don’t want to store their digital assets on an exchange due to the risk of theft and cyberattacks.
Many cryptocurrency owners prefer cold storage offline options, such as paper or hardware wallets. However, cold storage has its own set of problems. The greatest risk is losing your private keys, which is essential for accessing your cryptocurrency.
It is not possible to guarantee the success of a crypto investment. Many Defi projects on the blockchain were reported scams, only a few cryptocurrency projects will succeed.
The entire cryptocurrency industry may be subject to regulation, particularly if governments start to view them as a threat and not just an innovative technology. And many of the technology is still in development and has not been extensively tested in real-world situations.
b). Cryptocurrency adoption
Despite their inherent risks, cryptocurrency and the blockchain industry continue to grow stronger. Investors have access to institutional-grade custody services and much-needed financial infrastructure. Investors of all levels are now able to access the tools needed to manage and secure their crypto assets.
Many companies are now exposed to cryptocurrency markets and are creating crypto futures markets. Financial giants like Square And PayPal They make it easier to sell and buy cryptocurrency via their popular platforms. Meanwhile, Square and other companies have collectively invested hundreds and millions of dollars in Bitcoin, and other digital assets. Tesla In early 2021, Bitcoin was worth $1.5 billion. There are also rumours that Amazon will accept bitcoin as a payment option soon.
Although there are still many factors that can impact the safety of cryptocurrency, the industry is maturing. Both individuals and businesses are looking to get direct exposure to cryptocurrency as they consider it safe enough to invest large amounts of money.
3. Is crypto a good long-term investment?
Many cryptocurrencies such as Ethereum and Bitcoin are created with lofty goals that may be achievable over a long time. Although success is not guaranteed for any cryptocurrency project, early investors may be well-rewarded if they achieve their goals.
To be considered a long-term success for any cryptocurrency project however, widespread adoption is essential.
4. Cryptocurrency, should you invest?
If you think cryptocurrency usage will grow over time, then you might want to purchase some cryptocurrency directly as part your diversified portfolio. Make sure that you have an investment thesis for every cryptocurrency you invest in.
You can also consider other ways you could potentially make money off the rise in cryptocurrency. You have the option to buy shares in companies like Square, Coinbase or PayPal, as well as invest in an exchange. CME Group. It facilitates the trading of crypto futures. These investments may not be as profitable as those in cryptocurrency direct, but they have the potential for greater upside.
** Disclaimer:
I am not a financial advisor. Please do your own due diligence or seek financial advisors before making any investment decisions.
More to Read: Best Crypto to Invest in 2021
