Cryptocurrency is generating buzz in finance circles, with its prices often jumping up and down in dramatic fashion. That volatility is what has some investors intrigued and others scared off. But if you do your homework and avoid the risks, crypto could be a smart addition to your investment portfolio.
Crypto is digital money that’s not backed by companies or governments and can be used for payments or as an investment, similar to stocks or bonds. It’s highly volatile and doesn’t enjoy the same regulatory protections as registered securities, so it’s important to only invest what you can afford to lose.
It’s a global marketplace that operates 24/7 and is open to anyone with an internet connection. It’s also decentralized, meaning there’s no central authority that oversees and regulates the market. That’s why some believe it has the potential to disrupt traditional financial systems.
Blockchain is the underlying technology behind cryptocurrency. Blocks on a blockchain store transactional data in a way that’s difficult to tamper with. The blockchain is what allows people to make secure transactions across the globe without the need for a middleman. It’s the same technology that’s powering Bitcoin and more than 23,000 other cryptocurrencies.
The blockchain has many potential uses beyond cryptocurrency, too. For example, it’s a good way to track the authenticity of food and other consumer goods. Food poisoning outbreaks caused by E coli, salmonella and listeria can take weeks to trace back to the source. A blockchain system could help identify the source of an issue faster, so companies can quickly recall tainted products.
There are thousands of cryptocurrencies available, and the number continues to grow. Some are designed to be stable, with a value pegged to an existing currency like the US dollar. These stablecoins are meant to offer a more reliable alternative to other cryptocurrency investments, which can be extremely volatile.
The best way to protect your crypto is to keep it in a secure wallet, and to diversify your portfolio. Keep your seed words written down somewhere safe and don’t use them on websites that are not reputable or that you wouldn’t trust with your bank information. It’s also a good idea to avoid public Wi-Fi and use a virtual private network service when possible. And don’t fall for the countless Ponzi and MLM schemes out there that promise unrealistically high returns on your investments.
