What is Crypto-currency? Beginners Guide to Digital Cash
Crypto-currency is like regular currency but a digitalized one. In simplest terms, cryptocurrency is the stored value of money that is not bound to a country’s government, banks, companies, or the state itself.
Why is It So Popular?
They are so popular because they allow everyone to transfer money from anywhere globally, and the recipient receives it within 24 hours. Cryptocurrency can be transferred 24 hours a day and seven days a week, unlike online bank transfers or pay orders that aren’t received during a public holiday. In a way, cryptocurrency is superior to traditional money transfer options. It provides the transferor with a level of privacy, security, and immutability that isn’t offered under conventional money transfers.
Is It a Good Investment?
For anything to be treated as money, it must
- Have a store of value
- Should be treated as a medium of exchange, and
- It is considered to be a unit of account
However, cryptocurrency is also seen as an asset class form of investment, like stocks. Just like stocks can provide a high level of return, cryptocurrency works similarly. These are also highly volatile and can also lead to losses. Therefore, whether cryptocurrencies are a good investment depends on the investor’s investment portfolio.
For instance, if you’re nearing retirement, these cryptocurrencies aren’t for you with their highly volatile nature. However, if you can tolerate such fluctuations and volatility, cryptocurrency would be a sound investment or a critical way to diversify your portfolio.
Where Do I Buy Cryptocurrency From?
You can purchase cryptocurrency from a broker or through an exchange. However, when you decide to buy cryptocurrency, you need to open an account and deposit cash. For a newbie who has almost no knowledge of cryptocurrencies, you can purchase an ETF or an exchange-traded fund, buy a cryptocurrency-focused mutual fund, or even own stock in a company that focuses on cryptocurrency.
Are Cryptocurrencies Legal?
While cryptocurrencies’ legal regulations are still evolving, these digitalized currencies are treated as a security. Under the Securities Act of 1933 and the Securities Exchange Act of 1934, cryptocurrencies are subject to disclosure and registration. Cryptocurrencies are also subject to anti-money laundering requirements, tax treatments, and the regulation of Decentralized Autonomous Organizations (DAOs).
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