The popularity of cryptocurrencies is steadily rising, and it’s gaining more interest by the day across the globe. In fact, Bitcoin just hit an all-time high. A recent article on Time Magazine reported that the cryptocurrency hit a record price of over $68,000 for the first time in the second week of November. However, many are cautioning investors about digital currency’s tendency to fluctuate significantly, while others are advising that these movements should be ignored. Those who have already invested or are thinking about getting started may do well to heed the advice of financial advisers and experts. Here’s what they have to say:
What is Cryptocurrency?
Cryptocurrency is a form of digital currency that can be used to pay for goods and services online. It was first invented in 2008 by an unknown group of people using the name Satoshi Nakamoto. Bitcoin was rewarded to users through a process called mining. CNBC explains that this entailed solving complex puzzles to validate cryptocurrency transactions. This can be very expensive and time-consuming, not to mention power-demanding. What makes these ‘coins’ unique is the technology behind them: blockchain. Part of the appeal of cryptocurrency is the security this technology provides.
Blockchain technology is decentralized, meaning it is spread across many computers, all of which manage and record all the transactions that occur. A post on AskMoney explains how cryptocurrency wallets provide access to the blockchain, which in turn keeps track of all your transactions. The process of using a crypto wallet is simple and involves transferring the currency to a specified crypto address. The value then goes directly into your wallet. The popularity of crypto mainly lies in the belief that they will be the currencies of the future, especially since they do not involve centralized banks that reduce the value of money through inflation.
What Financial Advisors Are Saying About Crypto
Prepare for losses. Like any investment, be prepared for both financial gains and losses. This is especially true with Bitcoin or any other cryptocurrency since markets go through periods of volatility. However, some financial advisors view crypto as a lottery more than an investment strategy. This means you should only invest what you are willing to lose. Remember, it’s a high-risk, high-reward investment so risk-averse investors should steer clear.
It’s a rapidly changing landscape. Our post ‘How to Get a Job in the Finance Sector’ found that financial advisors should be in on the latest information and strategies, or else their clients could lose plenty of money in an instant. It’s worth noting that many experts are concerned about people dumping all of their investments into cryptocurrency for the wrong reasons or without understanding what they are truly buying. Advisors have admitted that the world of cryptocurrency is moving too quickly to be predictable for their recommendations. Therefore, it’s best to proceed with caution and do plenty of research on the cryptocurrency you’re investing in.
Crypto shouldn’t be an investment priority. Because cryptocurrency is so new, it may be best to refrain from having your overall financial strategy lean too heavily on it. It’s better to secure a fairly stable investment for your retirement fund that is projected for long-term growth. This is how the majority of your portfolio should be built. However, if there is extra money that you want to experiment with, then this is what you should use to buy crypto. And if you do invest in cryptocurrency, try not to go beyond big names like Bitcoin and Ethereum to lower your risk. Keeping up with cryptocurrency-related news on True Activist will also help you decide what’s worth investing in.
There’s a lot of things going on with cryptocurrencies at the moment, and it may be challenging to keep up with the latest changes. However, the best way to go about it is to only invest what you are willing to lose and, most of all, be in the know.