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A diverse portfolio of stocks, bonds, mutual funds, and futures is an important part of everyone’s financial success.
This has been the case forever. In the last few years, however, smart investors the world over have been exploring the viability of bitcoin and other cryptocurrencies as investments.
What is Cryptocurrency?
First, let’s break down some of the language. The term “cryptocurrency” is vague and almost misleading. Make no mistake, the different forms of currency can be traded for other currencies with which we are familiar. Unlike the currencies we are used to working with, however, cryptocurrencies are not backed up by anything of measurable worth.
It is easier to think of them as points that people earn by solving very complex algorithms. The solving process is called “mining.” And when we say very complex, we mean it. These are not long math problems that a human brain can solve in an afternoon or even a week. These are codes that take high grade computers to break down and resolve. We’ll get back to this in a minute.
It’s All About The BitCoin, Right?
Bitcoin was the first form of cryptocurrency to gain any real traction. It is no longer the only cryptocurrency in which people can trade and invest. As Genesis Mining bitcoin mining experts point out on their blog, another currency that is gaining in popularity is Litecoin. Genesis Mining describes Litecoin as the “silver” to Bitcoin’s “gold.” There are other alt-coins as well. For the most part, however, bitcoin is what investors are after and trying to accumulate.
How Much Is Bitcoin Worth?
This is where cryptocurrencies get tricky. Because Bitcoin, Litecoin, etc are not backed by any measurable product to determine their worth, their value tends to fluctuate. As of this writing, one bitcoin is worth around a thousand dollars. A couple of years ago one bitcoin was worth a few hundred dollars. Theoretically, the value of cryptocurrency is based on supply vs demand. Easy enough, right? Not so fast! Unlike traditional currencies, cryptocurrency supply is dependent upon the output of the creators. There is not a finite amount of a cryptocurrency to accumulate. The creators can simply make more, thereby deflating the currency’s value.
At the same time, however, the numbers do seem to be going up. And if a cryptocurrency creator decides that they aren’t going to make any more coins, the value of the current supply could skyrocket.
How to Get Cryptocurrencies
Because the currencies are digitally based, you’ll likely never have a physical representation of them. Coins are mined online and stored in online “wallets.” You have three options if you want to get some for yourself.
- You can buy them with your own traditional money
- You can build a super computer and mine for the coins yourself
- You can hire brokers to do the mining for you.
If you are serious about getting into cryptocurrencies the best option is to hire a broker to mine and trade coins for you. These companies work like stock brokers and other financial traders to make sure your wallets/crypto-portfolios are worth as much as possible. They are able to accumulate a larger store of them for you than you would likely ever be able to buy or mine on your own.
So Should I Invest?
That is really up to you. There are many who are convinced that cryptocurrencies are the future. And, given the rate at which traditional currencies and markets are fluctuating, it’s easy to see why they believe this. At the same time the increased volatility of internet security and privacy issues have caused many financial experts hesitant to fully embrace the crypto-monetary-trend.
If you do decide to invest, make sure you take the time to thoroughly vet your sellers and brokers. Make sure they have the best possible security measures in place so that your portfolio is protected.