Investing in cryptocurrency like Bitcoin, Ethereum, and others have become popular in recent years. Prices are soaring and major corporations invest large sums of money in these options.
What is cryptocurrency?
Simply stated, it is a new form of digital money. Also known as crypto, it uses cryptography (practice of securing communication under a third party) to secure and verify transactions, and to control the creation of new units of a particular cryptocurrency.
A lot of people are starting to get on board with crypto, not just for investing but also as a payment system. It is faster, lower cost than other payment systems, and it is global.
Major companies like Microsoft (XBOX), Starbucks, Overstock, and others are now accepting crypto to make purchases, and those investing are doing so heavily. Tesla recently bought $1.5 billion in crypto to further diversify and maximize returns on cash. MicroStrategy, a business intelligence company, bought over $1 billion to hedge against possible inflation and devaluation of the dollar.
If or when crypto becomes mainstream, you may be glad you invested in it. However, there are risks to investing in crypto at this time.
It is highly volatile, its prices have fluctuated a lot in previous years, and while they seem to have stabilized now, you're not completely immune.
It is not treated the same as cash, crypto is treated as property, so it may be subject to different tax rules.
It is unregulated, there is no governing body, so if you were to lose your cryptocurrency or have it stolen, there is nothing anyone can do about it. This also applies to companies investing in it.
Before investing in crypto, consider the risks and evaluate your business tolerance to loss. It appears crypto is here to stay and will continue to go up, and as such, it may be a good investment. Experts recommend only investing an amount that you are comfortable losing and holding for the long-term plan.