Like many Americans, you have probably seen at least a few advertisements for the cryptocurrency industry recently. If you’ve been paying attention to the news, there’s no question you’ve heard of someone creating a cryptocurrency wallet. With all the excitement, you may even be tempted to invest in, or mine, cryptocurrency yourself.
But before you dive in, you should know that cryptocurrency is inherently risky.
What is cryptocurrency?
A cryptocurrency, crypto-currency, or crypto, is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.
Unlike banks and brokerages, there's no regulatory body watching over the crypto market, which reports to the state and federal government. In addition, crypto prices are heavily susceptible to sentiment. As sentiment changes, prices shift — sometimes drastically. In other words, cryptocurrency is driven mainly by the hope that someone will purchase it for more in the future than the initial investment.
At the same time, many cryptocurrency exchanges have become targets for criminals. For example, did you hear about what the Justice Department has called its "largest financial seizure ever?" A couple was recently accused of conspiring to launder billions of dollars worth of bitcoin stolen during a 2016 hack, which targeted a well-known virtual cryptocurrency exchange.1
It’s natural to be excited about a new opportunity, especially one with as much media buzz as cryptocurrency continues to generate. But before you get started, it's crucial to research and understand the risks. We’re always here to help.
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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with Gowdy Financial Group, LLC., broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
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1. NBCnews.com, February 9, 2022
The Risks of Cryptocurrency
March 01, 2022