As we grow towards a digital civilization, it is not long before we use “digital money” for transactions, which is what cryptocurrency is. However, before cryptocurrency enters the mainstream, one of the biggest obstacles it will face is widespread adoption.
Technical difficulties can always be overcome with expertise, but change isn’t always that easily. If you’re new to cryptocurrency, our guide will help you understand what it is and how it can benefit you.
What exactly is cryptocurrency?
Basically, cryptocurrency is a form of digital money that can be used to buy stuff. This digital money will be no different from the money you keep in your bank and pay online through your phone or computer.
What’s different about cryptocurrency is the technology it is based off, the lack of middlemen (like banks) and it’s not tangible.
Cryptocurrency uses a decentralized blockchain technology, which keeps a record of all transactions via an online ledger and stores the data in blocks that are chained together in chronological order.
This decentralized structure allows them to exist outside the control of governments and central authorities.
Important Things to Know About Cryptocurrency
This form of digital currency is relatively new and is still in the beginning stages of shaping our future global economy.
With the introduction of Bitcoin, skyrocketing in value, and the development of new cryptocurrency, this digital money is beginning to gain popularity.
Here are some important things that everyone must know about cryptocurrency:
- Since the launch of cryptocurrency in 2009, millions of people have invested in it.
- Today, there are more than 2,000 cryptocurrencies available in the market.
- People can invest and participate in the crypto market 24/7, unlike stock market.
- Anyone can invest in cryptocurrency, from anywhere around the globe.
- The key to investing in crypto is to build a diverse portfolio with at least ten different coins.
- The buying and selling process of cryptocurrency is done through online crypto exchanges.
- Regulations on cryptocurrency are subject to a country’s individual laws.
- In the U.S., cryptocurrencies and blockchain-related financial services companies are regulated by a number of federal and state agencies.
- Within the last few months, the treasury department announced that any transfer worth $10,000 or more must be reported to the IRS.
Impact of Cryptocurrency
Virtual money has not only impacted the entire financial landscape of our global economy as well as the investment strategy for each person’s financial plan. Let’s take a closer look at the impact.
Global Impact of Cryptocurrency
Cryptocurrency has removed the national barriers as people can now easily trade their coins across borders. This helps reduce the economy disparity between countries and gives a fair chance of economic gain to every person.
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Impact of Cryptocurrency on Your Financial Planning
Most investors tend to take every financial decision based on how it will affect their life. As a result, it has become a norm for crypto investors to spend ample time researching and then investing in a coin.
If you’re considering investing in cryptocurrency, you should ideally plan your monthly finances and keep the investment capital separated for every month. It’s important to plan your finances and invest them while the market is at a low.
Impact of Cryptocurrency on Investment Plans
As investment slowly expands to cryptocurrency, you might also want to grab the opportunity and consider investing in cryptocurrency. Once you get your research and plan your capital investment, it may be quite fruitful to invest a portion of it into the crypto market.
- Cannot Be Counterfeit
Cryptocurrency uses a heavily encrypted online ledger to track all payments. Even though it’s intangible, every single token has a unique identity. As a result, every single token that has been mined is recorded and cannot be counterfeited.
- Extremely Safe
Cryptocurrency uses online blockchain technology. This means that your transactions are constantly monitored through a number of computers. It also means that your coin wallet is very secure.
- Great Investment Potential
With their growing popularity, crypto tokens have been viewed as a great investment that bear huge financial gains. If they invest smartly, anyone can expect their portfolio to flourish.
- Price Volatility
Crypto markets are extremely volatile, and the prices may skyrocket or nosedive in a single day.
- Difficulty in Adoption
After using a tangible form of currency for thousands of years, adapting to this new technology may take some time.
- Lack of Regulatory Organization
Its decentralization can be viewed as a drawback. Even though new legislation has been introduced in the U.S., state and federal agencies have cautioned policymakers from overregulating blockchain technology to avoid pushing the investments overseas.
Myths and Misinformation Associated with Cryptocurrency
- Cryptocurrency Is a Scam
Cryptocurrency is legitimate. People are suspicious of this currency majorly because it is digital and intangible.
- Cryptocurrency Is Unsafe
Cryptocurrency uses highly advanced online ledgering to track every coin and is extremely immune to online attacks.
- Cryptocurrency Doesn’t Have Value
The value of cryptocurrency is quite tricky to define, but it still has immense value with the crypto market cap of more than a trillion.
As the new technology gains traction and looks to be an integral part of our financial future, there are still a lot of unknowns. Investing always comes with some risk, be it the stock market or cryptocurrency, but learning about your different options is the first step.
This article is for general educational purposes only and is not written by a financial advisor.