Last decade can be attributed to the highest technological advancement which paved the path for new generation investment opportunity – crypto currency. Crypto currency is a digital or virtual currency. The name crypto currency is derived based on the use of cryptography to secure and verify transactions as well as create new currency units. Crypto currency works using a technology called Blockchain. It is a decentralized technology spread across many computers that manages and records transactions. Gold was once treated as common currency, which post Second World War was taken over by USD and even today it is the most accepted currency world over. Slowly but gradually the concept of crypto currency is gaining momentum, due to potentially huge gains. Flip of the coin one should also be aware of volatility & the high risk of losing investments.
The one basic advantage an investor looks at while investing in to crypto currency is lack of any middlemen. Any regular currency issued by a central bank requires middle men such as a Bank or a financial institution. Crypto currency runs on technology hence middlemen are eliminated. As crypto currency is not issued by any Central bank or backed by the government country’s monetary policy, inflation rates, and economic growth measurements that typically influence the value of currency does not apply, as such crypto currencies are not restricted to a specific geographic area and can be traded across the world.
Crypto currency comes with frictionless transactions and inflation control, at the same time investors are treating them as assets and adding them to their diversified portfolios. The non-correlated nature makes them a potential hedge against risk, similar to precious metals like gold. The prices are influenced by the demand and supply in the market.
Russia and US of America along with some other countries have accepted the limited use of Crypto currency as an alternative to regular currency, which means they can exchange crypto currency against goods and services in malls or pay taxi bills. Whereas some countries with the fear of losing Tax and terror funding have prohibited the use of crypto currency ex Indonesia.
Crypto Currency comes with a certain amount of risk as many investors see them as mere speculative products & not real investments. Cyber fraud is an inherent risk; these fraudsters can break into crypto exchanges, drain crypto wallets and infect individual computers with malware that steals crypto currency. One should be aware that crypto currency crash could have an adverse impact; similar to the mortgage-backed securities sparked a wider global financial crisis.
Crypto Currencies available for Investments
Bitcoin, Ethereum, Tether, Cardano, Litecoin.
Should I invest in Crypto Currency
To conclude Crypto currency is an alternative asset class and can be transacted 24/7, prerequisite internet and an investment account. At the same time lack of stringent regulations makes it vulnerable to risks. An exposure of not more than 1%-3% of the total portfolio can be recommended provided investment is within the regulatory framework. A higher allocation is definitely not advised as crypto currency inherits a high risk asset class family.