We hear a lot about Cryptocurrency in the news; it’s almost always surrounded in controversy but there are nice stories of some people getting very rich and I’ve often been asked by customers if it’s a good investment. My opinion is ‘no’, but here is some information to help you make your mind up.
Cryptocurrencies are online trading currencies and their coins can be spent in some online stores and even in some real shops. Just like with regular currency, the value of cryptocurrency can go up and down, sometimes dramatically.
To make money on the real currency market you might buy 10 Euros when they are worth one pound eachand you’ve spent £10. If tomorrow they are worth two pounds each, then you can sell them and you’ve doubled your money to £20.The same theory works with crypto: buy low, sell high, make a wedge.
Normal currencies, like the Pound or the Euro,are connected to a country’s economy and under-pinned by a central banking system. E.g. They are centralised. Cryptocurrencies however are de-centralised and not managed or regulated by a particular country, instead managed by a massive network of connected computers. There is always the risk of collapse and the currency could then be worthless. The de-centralised management makes it almost impossible to steal cryptocurrency, but this also means that transactions are almost totally anonymous and untraceable. This is why crypto is the favoured currency of criminals and is often used for drug deals, arms trade and bribe / ransom payments.Cryptocurrency values are also heavily influenced by external factors. Elon Musk has twice famously impacted the value of Bitcoin after tweeting a negative statement about it.
Bitcoin was one of the first cryptocurrencies and in early 2011, when the currency was about 12 months old, the value of one bitcoin was about one dollar. October 2021 saw an all-time high value of one bitcoin at $66000 but as of writing this in December 2021 the value is down at $50000 so you can see how volatile the value is.
Today there are many hundreds of cryptocurrencies available alongside bitcoin, each with their own value and exchange rate. Popular currencies are Ethereum, Litecoin, Stellar, Dogecoin. All have their subtle differences in the ledger technology and widely different values but they are all volatile.
My advice is: don’t invest more than you’re are prepared to loose. If your hope is to make a profit,then set a target and if you reach it:cash out and stay out.Avoid the obscure and brand new cryptocurrencies.