What you need to know about this industry disruptor.
By Jenny Hoff, Photo by André François McKenzie on Unsplash
Cryptocurrencies are block-chain-based digital technology that theoretically you could use to make purchases, although few places currently accept them as a form of payment. However, at the time of this writing, Bitcoin, the original cryptocurrency that came out more than 10 years ago, has reached an all-time high, surpassing $40,000 per coin. Its most recent bump came after Elon Musk, who recently moved his foundation to Austin, announced he invested $1.5 billion in the digital currency and in the near future Tesla would accept it as a form of payment.
To put the growth of this industry disruptor into perspective, just over three years ago, one coin cost less than $1,000.
Even for wary investors, it’s hard to ignore growth like this, regardless of if they’re unsure what these coins represent and if they’ll be around in a year or two. There are many first-time investors wanting to reap some of the potential profits, whether it’s buying a fraction of a Bitcoin or investing in cheaper cryptocurrencies. However, unlike more stable investments, cryptocurrencies swing wildly, easily going up or down by thousands of dollars in a matter of days.
“Whenever you’re investing in something, you don’t want to put in any amount of money you’re not willing to lose,” says Inc. 500 entrepreneur and investor Brian Evans. “There is always a risk element. That’s just the reality. But in this growing market, what’s happening now is a lot of things are going up.”
How to Buy Cryptocurrency
If you’re looking to invest in Bitcoin or another cryptocurrency, it’s not as easy as buying it through E-Trade. You’ll have to download a Bitcoin “wallet” through a secure app, ensuring your bank will allow you to make the purchase via your debit card or linked checking account. You may need to provide identification. Once you buy the currency, you’ll need to store the code generated for you in a secure location. If you lose it, you lose all access to your coins and whatever value they may gain.
To Invest or Not to Invest?
Currently there are many coins to choose from, ranging in price from less than a penny for a coin to tens of thousands of dollars per unit. Knowing which ones to buy takes research and time, but Evans says it’s wise to start with the original disruptors.
Before moving on to more obscure and cheaper coins, “my advice to people getting into the market is to look at Bitcoin and Ethereum to start with,” says Evans.
While it definitely feels like a bubble with such enormous growth in a short amount of time, there is future potential for digital currencies to become more mainstream. There is also technology behind them that can be used for other purposes. As of now, their worth is dependent on what people are willing to pay for them. If you believe Elon Musk’s move is the beginning of a new trend, it might be worth putting some money in the game. However, if you can’t see a future where cryptocurrencies stick around, you may be better off investing in an index fund, real estate or gold—investments that have a proven track record of steady growth and maintaining value.