Investors, listen up! A great new opportunity is just around the corner. You may have heard of cryptocurrency in general, or Bitcoin in particular, but up until now they haven't been readily available as investments. But, a recent ruling by the Securities and Exchange Commission (SEC) changes all that.
Here are Five Fast Facts on the new way to invest in crypto:
🪙 What Is Bitcoin? - To understand the SEC's ruling, we first need to understand what it's a ruling about. Bitcoin is the first cryptocurrency ever created. It was made public in 2009, and was an effort by an anonymous person (or group of developers; we don't know) as a way to have a direct currency exchange between people or businesses without the middleman of a bank or other financial institution. It's the most well known and used crypto in the world, and is often used for large criminal transactions or other purchases where the parties don't want any government or regulatory oversight. Some people want to own crypto like Bitcoin so they can actually use it, but others just see the potential to make money off of investments in it.
◼️⛓️ Block What? Another word you'll hear a lot around cryptocurrencies is blockchain. It's kind of complex, but this basically refers to a distributed network of computers that records, validates, and propagates each transaction independently through encrypted blocks of data. If you want to use crypto for purchases, you have to have a crypto wallet, which is the digital structure that holds the encryption keys to whatever cryptocurrency you own. Cryptocurrency is becoming an acceptable method of payment at an increasing number of legitimate stores and businesses, so while the origins are admittedly a bit sketchy, crypto is becoming a viable alternative to fiat currency like the US dollar.
💸 The Old Way - Until now, the only way to invest in Bitcoin or other cryptocurrencies was through ahem indirect methods or on crypto exchanges which charged hefty fees. The SEC has resisted allowing Bitcoin funds because they were too vulnerable to market manipulation and fraud.
📈 SEC Says... - Now we finally get to the exciting bit for investors: the SEC's recent ruling allows exchange-traded funds to hold Bitcoin, which means Bitcoin can be bought and sold as easily as other stocks and mutual funds. Apparently, the SEC has changed their tune, though they did offer a stark warning of risk along with their approval for ETFs. After the announcement, the price of Bitcoin shot up to its highest point in two years (almost $48,000!)
😲 Risks And Rewards - Bitcoin is known to be extremely volatile, with huge and rapid price fluctuations (just like all cryptocurrencies). So for anyone investing, it's definitely a "high risk, high reward" sort of situation. For example, at the end of 2019 the price was about $7200; just a year later it was almost $29k! November 2021 was the peak, at almost $69k...but it has since fallen to around $40k. Crypto investing has more roller coasters than an amusement park! But the point is that you can make -- or lose -- a ton of money with it.
🔥Bottom line: Bitcoin (and cryptocurrency in general) is a very sexy topic, but most people really don't understand what it is or how it works. There are still the same risks of fraud, market manipulation, and over-regulation that there have always been with it. But, there's big money to be made -- or lost -- by investing in it, and that's now going to be even easier with the SEC's new ruling. As with every other investment, we'd suggest talking with a qualified professional and not investing what you can't afford to lose. Just in case.
What do you think about Bitcoin?
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