Cryptocurrencies are digital tokens that enable direct payments between people via an online system. Their value does not stem from being legislated as legal tender, like national currencies do; rather it depends on what people are willing to pay in the marketplace for them – making cryptocurrencies a highly sought-after asset that has attracted much interest and speculation over time. Yet many remain uncertain whether these assets are safe enough for use or investment purposes.
Major concerns with cryptocurrency investments lie in their high degree of volatility. Bitcoin prices often see daily jumps or drops of 5-to-10%, and smaller coins often experience even greater swings in price fluctuations than Bitcoin does. Such price fluctuations make it hard for investors to identify what exactly they are investing in, let alone how to protect themselves from losses.
Mining cryptocurrency requires vast quantities of energy, which creates pollution and has been heavily criticized by experts. Furthermore, cryptocurrency market is heavily biased toward individuals earning $100,000 or more a year according to research conducted by Morning Consult; this demographic tends to have higher incomes than general population which may lead to financial irresponsibility.
Some cryptocurrencies feature fixed number of coins to combat inflation over time, while others feature fiat currency backing which helps secure their value. Still, there remains concern that cryptocurrencies could lose their worth over time due to price fluctuations and rapid exchange rates.
Concerns have also been expressed that cryptocurrencies could be vulnerable to hacking and manipulation; Ethereum was recently hit by several attacks costing millions. As such, regulatory bodies are working hard to make sure cryptocurrencies remain safe investments for consumers.
Cryptocurrency ownership continues to skyrocket. By 2022, nearly one-third of the global population owned some form of cryptocurrency; this was more than double their presence as in 2021. This increase can be attributed to greater awareness about these assets as well as greater access to information regarding them.
Bitcoin, Ethereum, Litecoin and Bitcoin cash are the four most widely recognized cryptocurrencies with market capitalizations exceeding $10 billion; each holds great promise as long-term wealth-storers. Although investing in these assets could change how we pay for goods and store wealth in future years, consumers must understand the risks involved when purchasing any asset involving cryptocurrency; only purchase what you can afford to lose and stay informed on news about these cryptocurrencies as well as companies behind them so as to avoid scams.
