Investing In Cryptocurrency

Everyone has that friend or ‘co-worker’s sister’s father in law’ who made their millions with cryptocurrency, and it sounds like the type of thing that’s too good to be true. The truth is, there’s a lot of risk in investing in cryptocurrency, and it’s likely some stories you hear are exaggerated.

If you’re intent on investing in cryptocurrency, then proceed with caution and only invest money that you are prepared to lose. The Financial Markets Authority has some good resources available to help educate yourself on cryptocurrencies too.

Cryptocurrency is one investment category that many investors are taking advantage of in today’s economy. Offering high risk and high rewards, cryptocurrency’s market volatility means that high returns can be just around the corner, but so can significant losses.

Whether you’ve dabbled in cryptocurrencies before or you’re a novice who’s keen to learn how to make money by investing in this new market, cryptocurrency provides an exciting opportunity. But not all cryptocurrencies are the same, and there are also a lot of cryptocurrency scams out there, so it’s important you use a NZ based platform and do your research before you commit any funds.

What Is Cryptocurrency?

A cryptocurrency is a digital or virtual currency that is secured by a form of cryptography known as blockchain. Blockchain makes it almost impossible to counterfeit or double spend a cryptocurrency, but it also provides anonymity. This is part of the attractiveness of cryptocurrency in that it’s inherently private, verifiable, and secured by cryptographic technology that prevents it from being counterfeited, stolen, or misappropriated. The blockchain technology used to secure cryptocurrencies is a distributed ledger enforced by a disparate network of thousands of computers. 

Cryptocurrencies create decentralised networks of payment that you can use to trade online or even in person with a smart device. A main component of cryptocurrency is that it is not usually issued by any government authority like a central bank, meaning they are less susceptible to government interference or currency manipulation. 

The market is flooded with many different cryptocurrency alternatives*, but here’s a few that you may or may not have heard of:

  • Ethereum (ETH)
  • Litecoin (LTC)
  • Cardano (ADA)
  • Polkadot (DOT)
  • Bitcoin Cash (BCH)
  • Stellar (XLM)

*We are not advising you to invest in these cryptocurrencies. Investment decisions should be made based on a complete and thorough evaluation of your finances and your current and future financial goals. 

How Does Cryptocurrency Make Money?

People love to invest in crypto due to the ease of buying, selling, and trading all available at your fingertips online or on a smart device. Cryptocurrencies gain value when their demand or usage increases such as when a large marketplace decides to accept them as a payment method. Also, when blockchain cryptocurrency mining processes change or become more efficient, when big names like Elon Musk promote certain crypto assets, or when a cryptocurrency partners with another cryptocurrency or exchange in order to increase access and uptake. 

It’s important to acknowledge that cryptocurrency can lose you a lot of money depending on how much you invest. They lose value when many people try to sell them at the same time or if companies choose to no longer accept them as a payment method.

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Is Cryptocurrency A Good Investment?

Cryptocurrency reached a critical mass around 2017 where the early adopter investors who were in-the-know did make millions, and many raved about their experience. Today, a lot of people are interested in the crypto craze because of the possibilities for exponential returns, but it’s not as easy as it used to be to make a mint from crypto. The market today is much more convoluted with many more cryptocurrency options and even more investors, making your options less clear.

Investing in crypto is only for those of us who thrive on high risk and are prepared to lose their entire investment. Yes, you have the potential to yield high returns in a relatively short period of time, but you also have the potential to lose everything in the same amount of time.

What are the risks of Cryptocurrency?

  • Exchanges may be vulnerable to cyberattacks.
  • Competition is fierce.
  • Regulations may pose a threat to crypto in the future.
  • Products based on cutting-edge technology have innate volatilities.
  • Cryptocurrencies are not widely used as mediums of exchange.
  • Potential for significant losses.
  • No physical good since value is held digitally.

What are the advantages of cryptocurrency?

  • A more secure medium of exchange.
  • Transactions are public and controlled by the people.
  • Potential for significant returns.
  • Free from government manipulation.
  • Wide market of options to choose from.
  • No physical goods to protect.

When you’ve considered the positive and negative aspects of cryptocurrency, you’re already more than a step ahead of many investors. Due to the volatility of cryptocurrencies, investment in this market should only form a small part of a wider investment portfolio that includes other, more secure, asset classes. The team at MyFuture can help you determine the right mix to ensure your long-term financial goals are achieved.

What Is The Main Purpose Of Cryptocurrency?

The purpose of cryptocurrency is to avoid one of the challenges of traditional currencies by transferring the responsibility and power into the hands of the currency holder. New crypto-coins are ‘mined,’ but not in any physical form as we know it. A network of computers interprets a complex mathematical formula to ascertain the legitimacy of a transaction on the blockchain. This makes transfers secure, anonymous, and verifiable, without being subject to government control or regulation. 

If you’ve got questions about cryptocurrency and how it can fit into your investment strategy, get in touch with the financial advising experts at MyFuture today for a FREE no obligation Discovery Session. We’ll discuss your current finances, your financial goals, and the various tools available to you to help you reach your goals.