For the Love of Crypto

Cryptocurrency is a digitally-encrypted, decentralized medium of trade. Unlike traditional fiat currencies (e.g., the U.S. dollar or the Euro) regulated by central banks that establish monetary policy and execute currency price stability, no central body administers and maintains the value of cryptocurrencies. Instead, these responsibilities are decentralized and dispersed extensively among cryptocurrency users over the internet via blockchain technology, which acts as a secure log for transactions, enabling the buying, selling, and transferring of digital assets.

So what are the advantages of cryptocurrencies? And how many are there? There are more than a few. The most popular ones are Bitcoin, Ethereum, Cardano, Solana, and Shiba Inu, but there are over 10,000 cryptocurrencies on the market now, each with its own unique set of characteristics, which include their proclivity for abrupt price increases (and decreases). Prices are determined mainly by the supply of coins from miners and the demand for them from buyers. And these supply-demand dynamics can result in substantial profits. The main advantage of crypto is that though you are taking a significant risk, you have the possibility of high rewards. Take the price jump for Ethereum last year, which nearly doubled from July to December, providing a massive payoff for investors who jumped on board at the appropriate moment (N. 26 Bank).

Another considerable advantage is that, unlike the New York Stock Exchange, which operates five days a week from 9:30 am until 4:00 pm, cryptocurrency trades on hundreds of exchanges around the world, 24 hours a day, seven days a week. This makes it easier for investors to reap the rewards of perpetual price fluctuations (N. 26 Bank).

As economies around the world see inflation rise, cryptocurrencies may offer investors a buffer against rising prices. Since crypto isn’t connected to a specific currency or country, its value reflects worldwide demand rather than, for example, national inflation.

While extolling them for their virtue, cryptocurrencies are not without their significant perils. They have proved to be a precarious or risky investment, as they can quickly descend to terrifying lows. Because of this volatility, crypto is not yet considered a reliable long-term investment.

Citations:

Browne,Ryan,CNBC.22Dec.2021,www.cnbc.com/2021/12/22/top-predictions-for-crypto-in-2022-from-bitcoin-crash-to-regulation.html.Accessed 30 Mar. 2022.

N26 Bank. 17 Jan. 2022, n26.com/en-eu/blog/pros-and-cons-of-cryptocurrency.
Accessed 30 Mar. 2022.