Profitt Report: What does the average consumer need to know about cryptocurrency?
Digital currencies, such as Bitcoin, are making headlines and some people are making small fortunes. This high-tech form of transactions is hard to fully understand, so what do you need to know as a consumer?
Bitcoin is just one type of this currency, called cryptocurrencies, because it’s extraordinarily difficult to trace. That kind of security is partly why it’s become so popular but financial professionals say proceed with caution.
Consider your dollar bill: the paper isn’t worth much, right? It’s worth one U.S. dollar because we all say it does. We use these debit cards as often, if not more often, than cash in today’s world and that transaction is all digital. Cryptocurrencies are kind of like that: all virtual transactions, but that’s where the similarities stop.
“This is a little bit more on the technical side,” said Mindy McIntosh of McIntosh & Assoc. in Freeland, “a little harder to understand and wrap your head around it.”
In brief, cryptocurrency is not issued by the government: it’s created and controlled by computer programs. These programs track transactions and how new coins are made. It’s such a complicated, secure process, that using cryptocurrency is more secure than using a credit card.
“If investors are willing to invest in the Bitcoin, make sure it's a portion of your money that if you lost all of it, you're okay with that,” McIntosh said.
Here’s why: cryptocurrency’s value varies day-to-day, even hour-to-hour. To see how Bitcoin’s value has shifted over the last several months, please click here.
“Some people love it and can make some money on doing things like that but you have to be okay with the swings, so if you're alright with the swings and a little bit of the unknown territory, it's alright,” McIntosh said.
That's why she isn't suggesting cryptocurrency as a retirement vehicle: she prefers more conservative investments.
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