For those who are unfamiliar, cryptocurrencies are a form of digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Cryptocurrencies have gained in popularity in recent years as their value has increased. As of June 2017, the total value of all cryptocurrencies in circulation was over $80 billion. While this is a relatively small amount compared to the global money supply, cryptocurrencies are still a nascent technology and their future value is difficult to predict.
Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services. Some merchants, such as Overstock.com, allow customers to pay with Bitcoin. There are also a growing number of brick-and-mortar businesses that accept Bitcoin as payment.
Cryptocurrencies are controversial, with some believing they represent a new form of money that could supplant traditional currencies, while others see them as a speculative investment or Ponzi scheme. Despite the controversy, the number of people using cryptocurrencies continues to grow.
If you are thinking about investing in cryptocurrencies, here are some things you need to know.
Cryptocurrencies are volatile and risky
Like all investments, cryptocurrencies are volatile and carry risk. The value of Bitcoin, for example, has ranged from a high of over $3,000 in June 2017 to a low of $200 in January 2015.
Cryptocurrencies are also highly risky because their value is based on speculation. There is no guarantee that the value of a cryptocurrency will increase or that it will even retain its value.
Cryptocurrencies are not regulated
Cryptocurrencies are not regulated by any government or financial institution. This means that there is no guarantee that your investment will be safe and that you may not be able to retrieve your investment funds if the cryptocurrency collapses.
Cryptocurrencies are not legal tender
Cryptocurrencies are not legal tender and are not backed by any government or financial institution. This means that you cannot use them to purchase goods or services in the same way you can use traditional currencies.
Cryptocurrencies are taxable
Cryptocurrencies are taxable, and you will need to report any gains or losses on your tax return. The tax laws surrounding cryptocurrencies are still evolving, so it is important to consult with a tax professional to understand how these rules may apply to you.
Cryptocurrencies are not for everyone
Cryptocurrencies are not for everyone and should only be invested in by those who are willing to take on the risk of losing their investment. Before investing in cryptocurrencies, be sure to understand what they are and the risks involved.
Cryptocurrencies: What You Need to Know
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