Five Common Questions About Cryptocurrency

  • Are crypto/currencies a good investment?
  • Is crypto/currency an investment?
  • What crypto/currency is the best?
  • How can crypto/currency safely be purchased?
  • Can I safely diversify my portfolio with crypto/currency?

Most things are steadily becoming digital except for money; cryptocurrency is slowly becoming more popular, but don’t bet the house on digital currencies until you’ve asked your accountant about them. People do check digital account summaries rather than paper statements, use credit and debit cards primarily instead of checks, and use PayPal to buy things online instead of using cash in person; however, the game hasn’t changed that radically. We still use cold, hard cash instead of currencies that can only be accessed digitally.

Every investor should be well-informed about cryptocurrency before they even think about purchasing such assets. Here are five questions everyone should ask their accountant, financial advisor, or “money guy” about cryptocurrency.

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1. Are cryptocurrencies a good investment?

The two main purposes of investing are to grow wealth and defend assets against inflation. Virtually everyone who invests carries their nest eggs over into retirement so they can earn money during the most immobile times of their respective lives. As such, most people invest their earnings into relatively stable, safe assets.

Investors who need to generate returns within one year’s time – this is a strategy that any accountant or financial advisor would never recommend – should only consider high-risk investments that are incredibly volatile. Cryptocurrency is known to be one of the most volatile stores of value to man. As such, investors should only stow away assets into cryptocurrency that they can afford to lose.

2. Is cryptocurrency an investment?

Dictionary.com defines “investment” as the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.

The goal of investing is to reliably seek returns that significantly outpace inflation. As mentioned above, considering the fact that almost all investors sit on their nest eggs of investments until retirement, unreliable stores of value should generally be avoided.

As such, cryptocurrency is generally not considered an investment. However, cryptocurrencies are one of the world’s few currencies that can be used to gain wealth passively. Technically, cryptocurrencies are simply secure exchanges of value.

3. What cryptocurrency is the best?

Like most things in life, determining which digital currencies secured by encryption – cryptocurrencies – are “the best” is essentially a proverbial wild goose chase. No crypto can objectively be considered the best; rather, investors should choose cryptocurrencies that best fit their needs – only then can a token, coin, or digital currency be considered “the best.”

The most valuable digital currency is Bitcoin, currently trading at roughly $7,600 USD per unit. It’s also been around longer than any other crypto.

4. How can cryptocurrency safely be purchased?

Unlike traditional investments like stocks and bonds, cryptocurrencies aren’t purchased through Charles Schwab, ETrade, or brokers, for example. Rather, exchanges like Coinbase and Poloniex are two of the most popular hubs to secure Bitcoin, Ethereum, and Ripple.

Simply provide any popular, well-trusted exchange with one’s bank account’s routing and account numbers or debit card to purchase virtually any digital currencies. Investors should make sure they understand how to transfer such currency to digital wallets before purchasing them, however.

5. Can I safely diversify my portfolio with cryptocurrency?

As touched on above, investors should only spend money on cryptocurrencies they can afford to flush down the proverbial – or literal – drain. This is solid advice because all cryptocurrencies, by definition, are volatile mediums of exchange.

Investors who are nearing retirement and don’t have oodles of money to spend should almost certainly stay away from coins, tokens, and digital currencies. However, younger people who don’t have any debt or investors who earn objectively-high salaries can safely diversify their portfolios with Litecoin, Bitcoin Cash, or Bitcoin – or any other well-established digital currency.

Cryptocurrencies are truly a modern marvel. Some experts believe that paper money will soon become obsolete and that Bitcoin and company will skyrocket in value before the market knows it. While playing cryptocurrencies as investments properly can certainly yield returns, don’t consider buying any until asking an accountant these five questions.