This post breakdowns what exactly Cryptocurrency is and the positives and negatives of them to help provide you with an informed decision whether to invest into it, or not.
So, what exactly is Cryptocurrency?
A form of online payment, without the involvement of a bank. It is a digital currency so there are no physical coins available. Cryptocurrency is decentralised meaning it is not controlled by the government or banks, unlike the pound or dollar.
Examples of popular Cryptocurrencies include Bitcoin, Dogecoin and Ethereum.
Positives
- High Risk = high reward? For someone relatively ‘young’ investors like myself whom should generally have a relatively high risk investment portfolio, cryptocurrency should fit right in. You could potentially make great gains, if the cryptocurrency you choose goes mainstream
- Mainstream adoption – in recent months we have seen an increase in Crypto uptake (mainly Bitcoin) by well-known and established companies. For example, it is not just Tesla allowing Bitcoin payments, nut also Expedia, Brewdog and on Shopify.
- It removes the ‘middle-man‘ so only two-parties are involved within the transaction – you can the sender. This also reduces any transaction costs.
- Unlike the stock market, Crypto can be purchased at any time of the day, including the weekend. Moreover, it is incredibly accessible to purchase and manage – with most Crypto can be handled at the comfort of your phone.
Negatives
- Just the Bitcoin network alone consumes 120 GW per second. If Bitcoin was a country it would rank 29th in terms of annual energy consumption, crazy right! For more information on Bitcoin electricity consumption check out this amazing tool produced by the University of Cambridge.
- Due to the high energy usage some argue that Crypto could be the ‘worst human invention’ resulting form the extortionate amount of energy required for what some would view as little benefit.
- All examples of crypto have been incredibly volatile, and have experienced high price fluctuations, which may work in your favour when purchasing Crypto.
- Cryptocurrency are not regulated, unlike existing mainstream payments.
My Opinions on Cryptocurrency
There is a lot of ‘hype’ around Crypto, and if a new investor is heading straight for them after seeing recent huge gains from Dogecoin and Bitcoin, I view that as not sustainable. It does have great potential returns, if you manage to strike one, however this also comes with high risks. As always, do your own research before making any form of investment, especially one that is as volatile as Cryptocurrency and I do not think you should overexpose your portfolio to a certain type of Crypto.
If you have done your research and think investing in Cryptocurrency is right for you, check out my Coinbase link, a secure platform that allows you to buy Crypto.