Today on GMN Barry Bigelow joins Sierra Naess for another segment of Money Matters. Today, Barry breaks down the basics of Cryptocurrency.
Over the past few years, cryptocurrency has gained a lot of attention. Still, it can be difficult to understand what it is, what it does, and why it matters. Today on Money Matters, our financial expert Barry Bigelow breaks down the basics.
Bigelow explains what it is, “Cryptocurrency is a digital token, but it is not centralized.” In other words, cryptocurrency is a form of digital money that isn’t backed by a government or bank. It can be used to buy things, but many people treat it like an investment, hoping its value will grow over time.
The second aspect to understand is this, if it doesn’t come from physical assets, how does it gain value? Bigelow explains its value comes from “scarcity, demand, and security.” Unlike dollars or euros, many cryptocurrencies aren’t tied to any economy or central bank.
Though it isn’t connected to an economy or central bank, its “digital ledger” is something called the blockchain. Bigelow shares, “Blockchain is essentially a public transaction… like a shared spreadsheet.”
Each transaction is recorded in a “block” and added to a public “chain” stored across thousands of computers. This makes tampering nearly impossible with today’s technology.
However, not all crypto is the same. Bigelow breaks it down into three main types, “There are transactional coins, like Bitcoin or Litecoin, used to buy and sell.” Then, “Utility tokens, like Ethereum, which power smart contracts.” And finally, “Stablecoins, these are pegged to real-world currencies (like USD) to reduce price swings.”
Lots of people wonder if crypto is safe. Bigelow says it depends on how you define “safe.” “You should never invest money that you can’t afford to lose,” he advises.
Still, he outlines the risks, “Volatility, prices can swing wildly overnight. No regulation, no FDIC, no guaranteed recovery if hacked. Then, password security, lose your wallet key and you may lose everything. Finally, regulatory risk, laws could change the game overnight.”
Bigelow leaves us with final thoughts, crypto is a new financial frontier. But like all investments, it’s not risk-free. “Every disclosure you see with investments is, investments can and do lose money. The same thing applies with crypto,” says Bigelow.
Before you buy, study the risks, secure your assets, and never invest more than you can afford to lose.