By now you have probably heard of a growing phenomenon called cryptocurrency. This new type of investment asset is loved by some, hated by others, and confusing to many. Here we’ll explain what cryptocurrency is, discuss a bit about its history, and explore the risks and benefits of investing in this new form of currency.

WHAT IS CRYPTOCURRENCY?
Cryptocurrency is a digital currency that uses a special form of cryptography called blockchain to allow for unbrokered, direct transactions between individuals or businesses. These blocks of data serve as an open source, decentralized record, which consists of “blocks” of transaction data, including the history and value of the coins. Each coin represents a single unit of cryptocurrency – rather than a fiat, or government-backed, currency, such as the US dollar, or a physical commodity such as gold, silver, or oil. To put it in simpler terms, cryptocurrency is a new type of money that only exists in a digital format. It’s protected by an advanced encryption technology to ensure that all transactions are secure and properly logged.

HOW CRYPTOCURRENCY WORKS. The blocks of data are organized into a comprehensive ledger through a process called mining, sometimes referred to as crypto mining. Miners work diligently to verify transactions through encryption and, once verified, they add blockchain units to the ledger. This open source ledger format, combined with blockchain technology, creates a method for verifying transaction data and cryptocurrency ownership. In addition, creating these blocks produces a predetermined amount of coins, and the amount will continually decrease the more coins are generated, which is what leads to cryptocurrency’s rarity and value. Click on the link below to have a look at how it works https://www.google.com/collections/s/list/FCKEYRQdKTSBkH-WXspgiHmhQ9JWGg/d4gmPJttq6o

HISTORY OF CRYPTO Cryptocurrency was originally created in 2009 when an unknown author using the pseudonym, Satoshi Nakamoto, published a research paper entitled: Bitcoin: A Peer-to-Peer Electronic Cash. This introduced the world to the concept of Bitcoin, but it wasn’t until nearly two years later that an actual crypto market started to take shape. As Bitcoin grew in popularity, alternative cryptocurrencies, commonly known as “altcoins,” began to appear.

Today, there are a number of cryptocurrencies which have formed a sizeable speculative market. After experiencing years of steady growth, there was a remarkable spike at the end of 2017, only to be followed by a major correction in 2018 caused by investor panic over a software update to the Bitcoin ledger. Cryptocurrency has since rebounded as the software update did not create any long-term issues within the ledger. Since then, the crypto market has regularly posted strong gains and today is becoming more widely accepted. Several large, consumer-facing businesses, including Microsoft and Whole Foods, now allow Bitcoin to be used as a form of payment, and Visa and MasterCard both support crypto transactions to some extent. Some banks and credit unions are even dipping their toes into the crypto market. With the crypto market growing so quickly, let’s take a look at who is participating in it.

Who Buys Cryptocurrency?
By late 2020, approximately 7% of the U.S. population had invested in cryptocurrency. That number is only expected to grow, with some forecasts predicting that it will double by the end of 2021. Cryptocurrency has found a range of investors, from everyday people to celebrities to wealthy entrepreneurs like Elon Musk. In fact, Musk’s electric vehicle company, Tesla, recently invested $1.5B in Bitcoin. Because cryptocurrency is globally available and requires no minimum holding amount to open an account or transact an exchange, it is accessible to anyone with internet access – regardless of their location. This widespread accessibility is a key reason so many people are jumping on the crypto bandwagon. Let’s take a look at what else makes this such a popular investment.

What Draws Investors to Cryptocurrency?
Cryptocurrency is appealing for several reasons. Like gold, silver, and other commodities, cryptocurrency is finite, so it has worked as an effective hedge against price instability and inflation in currency markets. In a diverse portfolio, crypto can be strategically positioned to mitigate these risks while maintaining exposure in a high growth market.
Unlike other assets, cryptocurrency is decentralized. Geo-political fears have less of an impact on pricing, because there are no concerns about access to a limited supply of a physical commodity. For instance, the U.S. experienced a period of staggering inflation in the 1970s that was tied directly to a major oil shortage. Such concerns may influence your likelihood of investing in things like, gold, silver, oil, or even coffee, but with cryptocurrency, these are non-issues.

Should You Consider Investing in Cryptocurrency?
Before making any investments, you should always evaluate your tolerance for risk and your financial goals. Determining if cryptocurrency is right for you can be challenging with all the buzz surrounding the topic, but it is certainly worth consideration. If the past decade or so has been any indicator, crypto can be a tremendously impactful addition to your portfolio.

What Are the Benefits of Investing in Cryptocurrency?
There are many reasons you may want to invest in cryptocurrency. Let’s take a deeper look at why you might be tempted to enter this innovative new market.
Domestic Currency Instability
Currency, especially the US dollar, continues to experience incredible devaluation caused by inflation. This is only likely to increase as the Federal Reserve prints more physical money to ensure payments for quantitative easing, stimulus packages, and other programs. As the value of the dollar drops, more money will have to be printed to meet the increasing cost demands associated with inflationary changes. These conditions introduce a great deal of instability to the long-term value of the dollar and can be observed in the cumulative inflation over the past 50 years. During this time, the value of the dollar has dropped by over 560%, meaning that if you held cash over that timeframe you have actually lost a significant amount of purchasing power. Crypto provides an alternative currency that is not impacted by inflation, because the number of coins has already been permanently limited.