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In 2021, the world of cryptocurrency is front and center, a far cry from the slow burn of crypto nearly a decade ago. With the investing potential crypto is showing, it's no surprise that more of us are starting to get involved in the crypto-space.
For many, crypto's low fees, profitability prospects, and additional security measures make it an attractive investment. This explains why crypto's popularity is increasing rapidly, including in some of the world's conflict zones. Meanwhile, some people see these currencies as an investment tool with the potential for high earnings in a short period, making it an ideal short-term investment.
The key to investing successfully in any space is education. But you'll find plenty of differing advice online, which can be confusing for those new to investing in cryptocurrencies.
This section of Money Morning Profit Academy is designed to demystify the world of crypto. By the end, you'll understand what cryptocurrencies are, compelling reasons to invest, potential risks, and how to get started with investing.
Whether you're looking for a no-nonsense resource or want to learn how to invest in crypto, you're in the right place.
What Is Cryptocurrency?
Cryptocurrency is a digital currency that uses encryption techniques to regulate the generation of currency units and verify the transfer of funds. Cryptocurrencies operate independently from a central bank, which is partly what makes them so appealing to investors. Some of the biggest players in the cryptocurrency space are Bitcoin, Ethereum, and BNB, but there are also lesser-known altcoins such as Dogecoin.
- Bitcoin: Bitcoin is the world's most popular digital currency. It's decentralized, peer-to-peer, open-source, and global. It allows anyone worldwide to send digital money to anyone else in a matter of minutes with near-zero transaction fees.
- Ethereum: Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract functionality. Ethereum went into development in 2014 before being officially launched in 2015.
- BNB: BNB can cover transaction fees, or you can trade it on Binance. The plan behind BNB was to incentivize traders who use Binance and help it become one of the most popular exchanges worldwide.
- Dogecoin: Dogecoin is an open-source, peer-to-peer cryptocurrency. Programmer Billy Markus from Portland, Oregon, invented Dogecoin. After seeing the huge gains and wild swings in crypto fortunes, Markus initially launched Dogecoin as a joke. Still, Dogecoin is valued in its billions, and Dogecoin's CEO describes the community as "strong and fortified."
5 Reasons to Invest in Cryptocurrencies
Aside from the additional security and transparency crypto give to a portfolio, there are other compelling reasons why you might consider investing in cryptocurrencies.
- Decentralization: Crypto is a decentralized digital currency that exists outside of governmental control, and you can trade it anonymously. This allows peer-to-peer trading and adds to the transparency of transactions.
- Reduced fraud: Blockchain technology creates an immutable public ledger system, meaning no one can change it. The technology logs transactions with permanent records accessible by everyone, which provides complete visibility to the parties involved. Although it's not a cure-all for fraud, it can reduce its chances.
- Protection against inflation: Inflation affects fiat currency, meaning over time, your investment can lose value. Investors in cryptocurrency still find themselves impacted by inflation. However, it's at a lower, more predictable rate.
- Diversification: Cryptocurrencies diversify your portfolio. Investors are usually advised not to put all their eggs in one basket, and crypto gives investors the diversification they need. Some investors also choose to diversify their crypto portfolios to guard against losses.
- Long-term potential: Although cryptocurrencies are volatile, they also have excellent long-term potential and can gain considerable value over time. For example, Bitcoin experienced significant increases in its worth after announcements by Tesla and Coinbase. As cryptocurrencies become more widely accepted, this may add to their future value too. However, just as any other investment, it's essential to remember cryptocurrencies' worth can move down as well as up.
The Risks of Investing in Cryptocurrencies
Of course, like all investments, investing in cryptocurrency comes with its share of risks. The cryptocurrency market has been highly volatile over the past few years so investors should be aware of the risks they are taking when investing in crypto.
The good news is, we take an in-depth look at these risks, which will help you make sounder investing decisions.
Some of the risks include:
- Lack of regulation
- Market volatility
- Minimal intrinsic value
Start Your Crypto Journey With Money Morning Profit Academy
Cryptocurrencies are taking the world by storm, and for good reason, too. These digital currencies provide a new way to transact and interact with each other, and for many of us, cryptocurrencies suit our digital lifestyles.
If you're new to cryptocurrencies and considering investing, Money Morning Profit Academy will help deepen your understanding of the market.
Lesson 1: What are Cryptocurrencies?
Lesson 2: How to Buy Cryptocurrencies
Lesson 3: Cryptocurrency Risks