What Is Virtual Currency And Should I Invest In It?

If you have ever wondered about all the talk about virtual currency, what it is and how you can profit from it, then you’ll appreciate this article. In this article, we will explain what virtual currency is and detail the benefits and risks involved in investing in it.

What is Virtual Currency?

Virtual currency is virtual money created and issued by its own developer. This virtual money represents a digital value that is not tied to a central bank, public authority or to a fiat currency, but one that is accepted as a means of payment and can be transferred, stored or traded electronically. Virtual currency is essentially a medium of exchange that in many ways that acts as currency. A subset to virtual currencies is cryptocurrency, which is virtual currency that uses cryptography to secure its transactions and to control the creation of new currency units. Bitcoin is an example of cryptocurrency. Not all virtual currency is considered cryptocurrency.

There are many pros and cons to using crypto currency that potential investors should be aware of.

Here are some benefits to using cryptocurrency:

• Privacy of transactions – not as private as it was before, but there are still ways to maintain some privacy of your transactions
• Lower Fees – to currency transaction fees or banking fees
• Worldwide use and accessibility
• No Third-Party Seizure – hard for creditors to seize your cryptocurrency unless its’ stored at a bank
• No intermediary
• Hard to track assets held in cryptocurrency

Disadvantages/Risks:

• High volatility in the value – prices can fall quickly with news of hacks, etc.
• Susceptible to hacking and theft
• Wallets can be stolen
• No buyer protections since virtual currency is not tied to a central bank or public authority
• No physical Form

Before investing in any cryptocurrency, it is highly recommended that you do your homework. There are thousands of cryptocurrencies trading on various block chains which makes it challenging to know which one to invest in. Additionally, performing adequate research can help protect you. Since the pandemic, there has been a rise in cryptocurrency scams which is why research on the currency should be performed. Not all virtual currency is created equal and some become nonexistent after some time.

Additionally, your investment in cryptocurrency as with any investment, takes into consideration your goals and objectives and whether you’ll be investing for the short term or for the long term. Given how quickly cryptocurrency can lose and gain its’ value, short term trading can typically increase the riskiness of your investment when compared to remaining invested in a well-known cryptocurrency over a period of years. Overall, your decision to invest and how long you can ride the tide of volatility is all a personal preference and will differ from person to person.