Cryptocurrency 101: Understanding the Basics
The rapid rise in the price of bitcoin and other cryptocurrencies has gained the interest of investors, financial advisors and the media alike. While many have had their interest piqued, it can be challenging to understand the basics of bitcoin and other cryptocurrencies. What really are they? Here are some things to consider before investing.
Cryptocurrency is hot right now. People are excited, and they’re diving into this new market for lots of different reasons.
What is Cryptocurrency?
Cryptocurrencies, also often referred to as coins, are virtual currencies that are created by encoding strings of data into units of currency. Cryptocurrencies are a digital means of exchange which use cryptography as a means of security. With a track record going back over a decade, cryptocurrencies are clearly more than just a fad. But they are still widely misunderstood by many people, with doubts persisting about their genuine value and practical use.
Unlike traditional currencies, they are not issued by the government, they are not regulated and they don’t have a physical form. It’s like buying virtual tokens.
What Do You Need to Watch Out For?
Here’s where you want to be careful. Cryptocurrency is risky for several reasons. It’s a new market and extremely volatile — investing in this market is definitely a gamble. Also, since cryptocurrencies aren’t regulated, they aren’t protected by the FDIC or any government body. This makes them a prime target for hackers and scammers.
Another risk factor? If you lose or forget your password, you can get locked out of your digital wallet for good. This is one of the reasons you should work with a professional who can help you make informed decisions.
We are not financial advisors and you should always do your own research.