If there is one asset class that has captured the investment world by storm, it has to be cryptocurrencies.
These digital alternatives to real and fiat currencies have caught on like wildfire – at least when it comes to trading. And in that, the underlying value of some of the most popular cryptocurrencies like Bitcoin and Ethereum have surged in value.
But despite recent profits, much of the appeal of Bitcoin and other digital currencies has more to do with the trading of them than the ability to use them to order a pizza or pay for a new shirt. With volatility reigning supreme in the sector and with their number one use in nefarious activities, Bitcoin and its likes are still very much gambles.
For investors, especially conservative dividend-seeking ones, this is one area best to avoid.
Born in the Financial Crisis
The basic idea of cryptocurrency is relatively easy to understand. The simple definition is that these “coins” don’t exist in a tangible form like a real dollar bill, but are made by computers and stored in a digital key or on the cloud. With no central bank or regulatory authority backing them up, they use cryptography/encryption to secure transactions and to control the creation of additional units of the currency. These currencies can be traded or used as a medium of exchange.