The cryptocurrency market has become overrun with scams, frauds, and businesses that look legitimate but are actually wolves in sheep’s clothing. In fact, in the first three months of 2018 alone, there were over $1 billion in reported losses from cryptocurrency-related crimes, according to the Internet Crime Complaint Center (IC3). If you aren’t careful, you could be next! Keep reading to learn how to keep your money safe while trading cryptocurrencies.
Bitcoin, the first and best-known cryptocurrency, was created in 2009. Cryptocurrencies are decentralized, which means they are not controlled by governments or financial institutions. Often, cryptocurrency is traded on decentralized exchanges and can also be used to purchase goods and services. They have been touted as the future of money by some analysts but criticized for facilitating illicit activity by others. Governments have attempted to regulate cryptocurrencies, with varying degrees of success. Some countries have banned them outright, while others like Japan recognize them as legal tender and establish regulatory guidelines for their exchange; China has prohibited banks from using them. Iceland has made it illegal to trade them without an approved license. Russia will ban all money surrogates – including bitcoin – starting July 1st, 2018. The US Department of Justice (DOJ) launched its first criminal probe into a corrupt public official who laundered bitcoin through a company called Coinbx last year. There is no telling how these issues will evolve as this novel technology matures. Investors should do their research before investing in any digital currency, because these currencies’ values can fluctuate wildly at any time due to supply and demand forces. However, many are optimistic about cryptocurrencies’ potential for fostering decentralization, disrupting capital controls, lowering transaction costs and bringing banking access to those who don’t currently have it. ICOs offer investors the opportunity to speculate on new types of digital assets and marketplaces with only tiny investments. And after years of debate, regulators now agree that you need to look at ICOs as securities and regulate accordingly. As I write this blog post, there’s been a flurry of new cryptocurrencies coming out every day.
About Cryptocurrency (Bitcoin)
Cryptocurrency is a digital or virtual currency that has developed recently, to a greater extent, as a medium of exchange. Cryptocurrencies utilize cryptography to validate and authenticate transactions, as well as to control the creation of new units. A cryptocurrency is an entry in a database that no one can alter without meeting a certain set of requirements. Bitcoin, the first and most popular cryptocurrency, was released in 2009. Cryptocurrencies are decentralized; they are not subject to government or financial institution control. Transactions are processed without any third party involvement or regulation, so it is hard to figure out who holds what when. All transactions have a public key for sending and receiving currency. These keys pair up with each other like lock and key – when someone wants to send money over the blockchain, they must make sure their public key matches with whoever they want to receive it from. With this system, an individual should be able to spend their cryptocurrency by converting it into fiat money through a bank account if need be. The only problem? Banks don’t always want your crypto assets either! At the end of 2017, Bank Of America froze the account of a hedge fund because they didn’t believe bitcoin had value and were worried about transaction fraud. Worse yet, some banks have just flat out refused service to people who own cryptocurrencies. In November 2018, TD Bank Group announced that customers will have their accounts closed after 90 days if they trade in cryptocurrencies. Faced with these risks, many investors choose to store their coins on an online wallet which does require personal information but does not offer FDIC insurance protection.
What Is The Bottom Line In Cryptocurrency?
Cryptocurrency is still in its infancy, and the jury is still out on whether or not it will be widely adopted. However, there are a few things we can say for sure about cryptocurrency: it’s decentralized, it’s borderless, and it has the potential to revolutionize how we interact with the digital world. For these reasons, many believe that cryptocurrency is here to stay. As such, investing in cryptocurrency carries significant risk. It could end up being worth nothing one day; it could skyrocket and replace traditional currency as we know it. As with any type of investment, you need to do your research before you dive in head first. One strategy that seems to work well is diversifying your portfolio. That means if you put $1,000 into bitcoin, put another $1,000 into something else like Ethereum. Some people go so far as diversifying their portfolio by geography – getting money in Europe, Asia, North America and South America for example – but this isn’t necessary at all. You also want to make sure you don’t invest more than you’re willing to lose. It’s good practice when making any kind of investment decision to have a stop loss amount where if the market goes south past this number (let’s say 20%), you immediately sell what you’ve got left without hesitation so that your losses are minimized. After reading this post, I hope you’ll consider taking some time to research crypto and then think carefully about what kind of stake you want to take. Whether your an investor looking for long-term gains or someone who wants to jump in and get rich quick, understanding the risks is key.
FAQ – Frequently Asked Questions
1. What is the bottom line on crypto?
2. How do I get started in the crypto world?
3. What are the benefits of crypto?
4. What are the risks of crypto?
5. What should I be looking for when choosing a cryptocurrency?
6. How can I make money with cryptocurrency?
7. Is cryptocurrency here to stay?
8. Is cryptocurrency legal?
9. Will cryptocurrency replace traditional currencies?
10. Are cryptocurrencies secure?
11. Is there anything else I need to know about cryptocurrency before getting involved?
12. Who or what regulates cryptocurrencies?
13. Can anyone invest in cryptocurrency?
14. Who controls the supply of cryptocurrency and how is it generated?
15. What determines the value of a particular cryptocurrency, and how does that value change over time?