Crypto is a digital, encrypted way to transfer value online that’s decentralized and independent of banks and governments. Using crypto eliminates the need for a middleman, allowing you to send money globally, near-instantly, 24/7 and for very low fees. It also opens up new possibilities for innovation and invention.
While crypto inspires passionate opinions ranging from those who believe it’s a transformational technology to those who worry it’s a fad, applying basic investment tenets can help you decide if it makes sense for your portfolio.
There are a few key things to remember when buying, selling or spending crypto:
Paying for goods and services: More shops and service providers are starting to accept crypto payments, opening up more options for consumers. For example, some schools and online courses now accept Bitcoin, allowing students worldwide to pay for learning in a way that’s both private and affordable. Also, some wellness retreats and personal coaches now accept crypto, bringing transparency and ease to health care.
And for those who travel a lot, being able to use crypto while abroad can cut down on foreign exchange fees and costs. In fact, there’s a growing community of “crypto nomads” who exclusively use crypto when they travel.
Investing in crypto: The process for investing in cryptocurrency is very similar to how you would invest in stocks or mutual funds. To get started, you’ll need to select an exchange or investment platform and create an account. You’ll also need a digital location to store your coins, called a wallet. This can be done through the exchange or investment platform or through other apps or services. Lastly, you’ll need to verify your identity before investing any money.
Some of the risks associated with investing in crypto include:
Volatility: Because cryptocurrencies are not backed by any government or company, their value can fluctuate wildly. This can make it challenging to know how much to spend, and it can be easy to lose money if you buy too much.
Lack of regulation: The legal status of crypto is still evolving, and regulatory changes or crackdowns can have big impacts on the market.
Energy use: Some cryptocurrencies, such as Bitcoin, require substantial amounts of energy to mine or operate. This can strain the environment and contribute to climate change.
Considering that most cryptocurrencies are unregulated and can be hacked or fail, it’s important to consider the risks carefully before investing. And because most crypto holdings are not insured like money in a bank account, you may want to consider getting professional advice before making any investments.