Whether you’re new to investing or a seasoned pro, you’ve likely heard the term Bitcoin floating around. The Winklevoss twins (also known as those guys who claimed Mark Zuckerberg stole their idea for Facebook) bought into Bitcoin in its early days, becoming billionaires when the currency’s value skyrocketed. Since then, the value of Bitcoin has dropped, then surged again, returning the famed twins to billionaire status.
Not everyone who’s bought into Bitcoin has been so lucky. One man famously traded 10,000 Bitcoins, worth $30 at the time, for a couple pizzas. As the value of Bitcoin rose, that $30 in Bitcoin became $190 million, likely leaving that poor pizza lover with some serious regret.
These highs and lows are the norm for cryptocurrency. Bitcoin is by far the most popular type, but there are others—Ethereum, Binance Coin, XRP and Dogecoin, to name a few—gaining steam. In total, there are more than 5,000 cryptocurrencies out there, and that number continues to grow.
Let’s back it up a bit and talk about what, exactly, cryptocurrency is.
It’s a digital currency that uses files in place of money. There is no central authority that manages its value, although some countries are itching to start. Crypto is a bit of a wild card—you might get ahead if the market does well, or you might end up with a pizza full of lost hopes and dreams.
Before you hand over your life’s savings to jump on the crypto bandwagon, let’s take a look at the pros and cons of buying crypto.
Users are anonymous
Personal information, like your name and address, isn’t linked to the cryptocurrency you send or receive. This makes crypto a chosen tool for those up to some less-than-legal activities, but it also gives peace of mind to those concerned about their online privacy.
While your personal information remains personal, your transactions—and every transaction of every crypto user—are stored on something called a blockchain. A blockchain is made up of blocks of data that can be viewed by anyone at any time. So, if you spend 10,000 Bitcoins, or whatever your crypto currency of choice may be, on a pizza, it becomes public knowledge that 10,000 Bitcoins were transferred from one user to another. The company you ordered from might need to collect some information from you, like what you want on your pizza and where it’s being delivered to, but those on the blockchain will be none the wiser as to where those 10,000 Bitcoins went.
Some see this transparent system as a welcome change from traditional banking, which, due to its very setup, is unable to share information in the same way.
Provided you have a cell phone, you can buy, use and manage your cryptocurrency 24-7. You don’t need a fancy setup or even a computer to dabble in cryptocurrency—just Internet access and a little crypto know-how.
No protection from scammers
You know how if you’re scammed via your credit card or bank account, your bank will (usually) work with you to recoup what you’ve lost? That’s not the case with crypto. No authority to oversee operations plus opportunists looking to cash in on emerging technology and inexperienced users means you’d better keep a close eye on your cryptocurrency.
One minute, your crypto could be worth millions and the next, you’re on the phone with an insolvency lawyer. (We sincerely hope not, but you get the point.) Crypto is unpredictable, as far as how its value will perform. If you’re looking for a stable and steady investment vehicle, crypto might not be it.
It’s challenging for the tech-challenged
Bitcoin? Blockchain? Crypto? If this is all sounding like a foreign language, you might be more than a little hesitant to put your money on the line. Fair enough. Crypto is not the easiest to understand if you don’t speak tech or have some understanding of investing.
The good news? There are people who do speak tech and get what this crypto stuff is all about. They’re financial advisors, and they can help you invest whatever you have to invest in a way that makes sense to you. At the end of the day, it’s not about keeping up with the latest investment trends as much as it is about growing your money by investing intelligently.