Cryptocurrency, or crypto, is an increasingly popular investment alternative. It’s a type of digital asset that has gained widespread acceptance as a way to make transactions more secure and to allow people who may not have access to financial services to invest in markets otherwise closed to them.
Crypto is also used as a means of payment and as a store of value. It’s also becoming a method of democratizing entities that previously wouldn’t be able to take part in financial services because they didn’t have the necessary technology or infrastructure. However, investors are cautioned that cryptocurrency is extremely volatile and can lose value in a very short time period. As a result, it’s best to only invest in small amounts or as a very small portion of your overall portfolio.
Investing in crypto requires a great deal of market research and understanding of the fundamentals. It can be very risky and should only be done if you have a solid plan for how to use your investments. The price of cryptocurrencies can rise and fall dramatically on nothing more than rumors or speculation that prove to be false. For new investors who don’t have the skills or high-powered algorithms to execute trades quickly and efficiently, this volatility could be devastating.
There are also many questions surrounding whether crypto is legal and how it is taxed. As governments around the world continue to grapple with how to handle cryptocurrencies, regulatory changes and crackdowns are likely to affect the market in unpredictable ways. It’s important to understand the laws in your area before investing and always consult a trusted adviser for advice before making any financial decisions related to crypto.
Crypto can be stored in a “wallet” that is controlled by the user, rather than a bank or other financial institution. These wallets are protected by a complex system of encryption that allows for only the owner to access and control it. The underlying security of crypto is a technology called a blockchain, which creates an ongoing, constantly re-verified record of every transaction made using that currency. This technology is the result of decades of computer science and mathematical breakthroughs.
Using crypto in your operations may require significant adjustment across multiple departments and a commitment to a longer-term approach. But it can also help you develop new methods of innovative commerce and expand your reach in the global marketplace. Deloitte’s complimentary report, Corporations investing in crypto: Considerations and considerations, can help guide your journey.