Should You Invest in Cryptocurrency?

Jimmy Y. says:

Cryptocurrency seems to be mentioned more in the news lately. Have you podcasted about cryptocurrency as an investment option?

Thanks for your question, Jimmy! You've probably heard that the value of Bitcoin recently skyrocketed. It was valued at just over $10,000 in October 2020 and is worth more than $50,000 as of March 3, 2021. That's 50 grand for one Bitcoin!

Every year we hear that cryptocurrencies, such as Bitcoin and Ethereum, are getting more popular for making purchases. While it's still far from mainstream acceptance, many businesses, such as PayPal, Microsoft, and Overstock.com, have added one or more cryptocurrencies to their platforms and take it as a form of online payment.

But does that mean you should invest in cryptocurrency? Let's talk about what cryptocurrency is, whether you should invest in it, and how to do so if you choose.

What is cryptocurrency?

Let's begin with a primer on cryptocurrency, which is digital money that runs on blockchain technology. (Stay with me and I'll explain what blockchain is in a moment.) Cryptocurrencies are exchanged directly online without a middleman, such as a bank, credit card company, or government. 

One coin of a cryptocurrency is simply a line of code, not something you can see or put in your wallet. Think of a blockchain as a global checkbook created by computer algorithms.

A cryptocurrency is encrypted and decentralized, which means there isn't any central authority (such as the Federal Reserve) to manage its creation or value. Instead, transactions get recorded in code via a digital and open-source ledger called a blockchain. 

Think of a blockchain as a global checkbook created by computer algorithms. Once a cryptocurrency verifies a transaction, it keeps a record of it in "blocks" that get linked together on a "chain" of previous transactions. One coin of a cryptocurrency is simply a line of code, not something you can see or put in your wallet.

Bitcoin was first created in 2009 by an unknown person who goes by the name Satoshi Nakamoto. While it's the most well-known cryptocurrency, there are thousands of different types in circulation. Bitcoins are created or "mined" by various people and companies worldwide using powerful computers that organize and validate the currency.

It would take a massive amount of resources for a cybercriminal to change the blockchain ledger and steal cryptocurrency.

What many people love about cryptocurrency is that it verifies transactions while keeping users anonymous. Plus, there's so much verification for each transaction that it can't be hacked, stolen,...

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