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A Guide to Cryptocurrency 2021

Crypto may be here to stay. What should you know?

People spend small fortunes on non-fungal tokens or NFTs (which, until recently, you would be forgiven for thinking are your cool cousin's new favorite band). You can buy a car (or tickets to the game) with Bitcoin. Elon Musk (and his mother) wisely cracked the crypto on Saturday Night Live . Even if cryptocurrency still feels new and complicated, one thing becomes clear: Understanding what it is and what it can mean for your end result is important.

In this article:

Why is cryptocurrency so popular right now?

If cryptocurrency is more than a fad, there are two major reasons for this. The first has to do with the built-in security and potential for anonymity, especially during financial transactions.

"Cryptocurrencies make it easier to transfer money between two parties without the need for a trusted third party," said Courtney Zaharia, a consultant for Pelicoin, a Bitcoin ATM service located in Gulf South. “These transfers are secured through the use of public and private keys. Only the owner knows the private key, and this allows transfers to be made with minimal processing fees.

The second reason why people are interested in cryptocurrency trends has to do with its potential investment value. Will buying Bitcoin now lead to higher returns than the average later? Is there any value in investing in non-Bitcoin cryptocurrencies, such as Ethereum or the infamous Dogecoin? How about non-fungal tokens (NFT), which allow people to own an original digital asset like Nyan Cat gif, which – as the New York Times reports – only sold for almost $ 600,000? Or are the risks too great?

We asked the experts if cryptocurrency could be a good investment – and they did not necessarily agree on an answer.

"Many people can benefit from these assets, but they should be smart about investing in them," said Nate Tsang, founder and CEO of WallStreetZen.

"It's still unknown territory," explains Michael Hammelburger, CEO of The Bottom Line Group. "It's too early to tell if it's a bubble or not."

"Investing in NFT may sound attractive, but a year or two from now, you never know how people will see the value in something they can easily copy," argues Ben Reynolds, founder and CEO of Sure Dividend. [19659008] Still interested in getting started with cryptocurrency? We have a guide to help you understand the latest trends in cryptocurrency.

"It's still unknown territory. It's too early to say if it's a bubble or not. "

—Michael Hammelburger, CEO of The Bottom Line Group

What Is Cryptocurrency?

Zaharia. "Most cryptocurrencies are based on blockchain technology, which is essentially a distributed ledger applied by a diverse network of computers. Because a central government does not distribute these currencies, they are theoretical t immune to government interference. "In a strange way, it rakes back to the day of change, but with virtual cryptocurrencies that take the place of goats and skins.

Cryptocurrencies are distributed directly from one owner to another without the need for a bank or credit card issuer. to keep track of the transaction. You can consider it a type of cryptocurrency that does not require the involvement of traditional financial institutions. The ability to privately transfer digital currency that is disconnected from the larger financial system has – as you can probably imagine – both its advantages and its disadvantages.

"Because cryptocurrency transactions are semi-anonymous, it makes them well-suited for many illegal activities such as money laundering or tax evasion," says Zaharia. "However, this anonymity is also a positive, as it provides privacy to whistleblowers or activists under oppressive governments."

What are some of the most popular cryptocurrencies?

Even if you do not know much about cryptocurrency, you have probably heard of Bitcoin. "It's the most common cryptocurrency," Zaharia explains. "Bitcoin accounts for more than 60% of all cryptocurrency value."

Of course, Bitcoin is not the only option for digital currency in the cryptocurrency market. "Some of the competing cryptocurrencies include Litecoin, Peercoin, Namecoin, Ethereum, Cardano and EOS," says Zaharia.

Ethereum is probably the second virtual currency you've heard of – most NFTs are part of the Ethereum blockchain, for example, and Ethereum is doing its best to establish itself as a major Bitcoin competitor.

"In 2021, Ethereum plans to move from a proof-of-work model to a proof-of-stake model, making it possible to run on much less energy," Zaharia told us. "One of the most significant disadvantages of Bitcoin is the extreme amount of energy needed to mine it."

If you are considering getting started in cryptocurrency trading, you do not have to worry about mining – it is still possible to mine your own cryptocurrency if you are willing to build the necessary home computer installation, but there is enough Bitcoin and Ethereum in the world now that you can simply buy the ones you want without having to make any cryptocurrency. Many services like Coinbase also allow you to buy fractions of Bitcoin or other cryptocurrencies, which can be the most affordable option if you want to start trading cryptocurrencies.

What is NFT, anyway?

An NFT is a non-spongy token . "This term more or less means that it is something unique that cannot be replaced with anything else, such as a unique trading card," explains Zaharia.

Some of the first NFTs were exceptionally kind Bitcoins called "Colored Coins." Later, sites like CryptoKitties let people collect, breed and trade unique digital cats. Today's NFT still includes these types of digital icons, but the NFT concept has been expanded to include Nyan Cats, original music – Lindsay Lohan recently auctioned off the NFT version of her original song "Lullaby" for a high bid of $ 85,484.09. according to EDM.com – and art.

"The current buzz is about selling digital art," Zaharia said. "Many speculate that NFT will be the new way of collecting art, but there is also speculation that this new form of collection will be a playground for the ultra-rich."

How much does a work of non-spongy art cost these days? As Verge reports, digital artist Mike Winkelmann, also known as Beeple, recently sold an NFT of a collage titled Everydays: The First 5,000 Days for $ 69 million. This transaction took place at a Christie's art auction, which helped establish the NFT as not only legitimate but also culturally significant.

Is cryptocurrency really an investment?

"Cryptocurrencies will not go anywhere anytime soon," Zaharia told us. "As these become more widely accepted, you may find it helpful to have some crypto under your belt."

With that said, Zhang suggests that you learn as much as you can about cryptocurrency if you are considering investing. “Take the time to learn more about the market, the different types of coins and tokens, which platforms allow you to trade freely, how much capital you need, etc. When you understand a deeper understanding of assets and risks, you should just consider to invest in them.

Most experts suggest that you avoid making cryptocurrency a large part of your portfolio – especially since it is still unclear what the value of a cryptocurrency investment may be in the next 30 days or 30 years. "Investing in crypto and NFT for your portfolio can be very risky," Reynolds explains. "People who decide to invest in it should limit it to a small portion of the high-risk section of their pension portfolio."

Some experts also questioned the value of NFTs compared to cryptocurrencies such as Bitcoin and Ethereum. "If you're the type of person who spends thousands of dollars on art regularly, you can at least participate in the NFT craze," Zaharia recommends. "But remember that because it's a digital format, you simply pay for the original copy while countless others download it for free."

However, there is a good reason to consider buying an NFT – and that is to support the person who created it. "If the artist creates NFT and then sells it, it can support the art community," says Hammelburger. "For me, this is a good investment."

Note: This article is for informational purposes only. Haven Life Insurance Agency does not offer or recommend the purchase of cryptocurrencies.

Our Editorial Policy

Haven Life is a customer-centric life insurance agency supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and general well-being can be refreshingly easy.

Our Editorial Policy

Haven Life is a customer-centric life insurance agency supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and general well-being can be refreshingly easy.

Our content is created for educational purposes only. Haven Life does not support the companies, products, services or strategies discussed here, but we hope they can make your life a little less difficult if they suit your situation.

Haven Life does not have the right to provide tax, legal or investment advice. This material is not intended to be provided and should not be relied upon for tax, legal or investment advice. Individuals are encouraged to seek advice from their own tax or legal counsel.

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