Making Sense Of Cryptocurrencies
North American Precis Syndicate
Cryptocurrency is a digital representation of a stored value secured through cryptography, a mathematically intensive encryption process designed to enhance data protection and authentication. (NAPS)
(NAPSI)—Social and traditional media have been abuzz with articles and
information about the rising phenomenon of digital currencies. But what does
it all mean and should you buy in?
What Is Cryptocurrency?
Cryptocurrency, or simply crypto, is one type of digital currency.
Cryptocurrencies are distinct from "fiat currencies" such as the dollar, euro
or yen. Unlike fiat currencies, crypto isn't represented or organized by
physical paper units or coins. Rather, each unit is a unique alphanumeric
string of computer code.
Also, cryptocurrencies are not issued by a central bank. Instead, they are
controlled by technology that determines how many units are produced and how
transactions are recorded. While Bitcoin is one of the earliest and most
recognized cryptocurrencies, more than 1,000 cryptocurrencies currently
For U.S. federal tax purposes, cryptocurrency is treated as property,
which means selling or exchanging it can have tax consequences.
Cryptocurrencies and Risk
Buying, selling and using cryptocurrencies comes with numerous risks.
• In some cases, you can spend and trade crypto, but these products are
not legal tender in the U.S. and most other jurisdictions. No law requires
companies or individuals to accept crypto as a form of payment. If no one
accepts a specific cryptocurrency, that crypto will become worthless.
• Platforms that buy and sell cryptocurrencies can be hacked, and some
have failed. Consumers can—and have—lost money.
• Cryptocurrency payments are irreversible. Once you complete a
transaction, it cannot be reversed.
Cryptocurrencies and Investing
All investments come with some degree of risk, and cryptocurrencies are no
exception. Only invest what you can afford to lose and be aware that you may
lose some or all of your investment.
Investing in cryptocurrencies can take many forms, such as purchasing
coins in the hope their value increases or buying shares in platforms or
companies that facilitate blockchain technology and other aspects of the
cryptocurrency revolution in the hope they succeed.
Another way to invest is through an Initial Coin Offering, or ICO. An ICO
is a way for companies to raise money that involves the creation and sale of
digital tokens. A certain number of these tokens are sold to investors in
exchange for other cryptocurrencies or fiat currencies like the dollar.
As with any new industry or concept, be alert for fraud, which has
occurred in both ICO and direct currency purchases. Pump-and-dump scams are a
potential risk with some crypto-related stocks, particularly those that do
not list on a major exchange such as the NYSE or Nasdaq.
Cryptocurrencies and the technologies that power them may hold great
potential for legitimate innovations in capital raising and financial
markets. But it can be a challenge for investors to verify information about
these products to make informed decisions. There are also major questions
about how these currencies are regulated both domestically and across the
The markets for cryptocurrencies continue to display high levels of
volatility, and involve speculative risk and the potential for fraud.
Speculators have been drawn to cryptocurrencies as a way to make a quick
profit. But like any speculative investment, you can lose money.
And even when legitimate companies flock to a hot, new sector, fraudsters
almost always follow suit. Look out for guarantees, unregistered products,
claims of overly consistent returns, complex strategies, missing
documentation, account discrepancies and pushy salespeople. All are red flags
of potential fraud. Use FINRA BrokerCheck® to check the
registration status of, and additional information about, the people and
firms that tout these opportunities.
To learn more about how to protect your money, visit the FINRA Foundation's
"Investors can use FINRA BrokerCheck to
check the registration status of, and additional information about, people
and firms that tout cryptocurrency opportunities. http://bit.ly/2yNhAiU"
On the Net:North American Precis Syndicate, Inc.(NAPSI)