With years or even decades of trading and advising experience under your belt, you have no issue sifting through bears, bulls, and the fluctuations of the stock market. As cryptocurrency works to dip its toes into the mainstream, you are not alone if terms like "bitcoin" leave you feeling unsure of your strategy.
Is cryptocurrency an attractive option for you?
There's no telling whether cryptocurrency will establish enough of a foothold to be worth the time of established financial institutions or individual traders. In fact, a drop from a high of $20,000 this past December to $7,000 last month leaves the future of bitcoin as uncertain as ever, according to "What's the Problem?", a recent article by RBC Royal Bank.
Whether you choose to become involved with cryptocurrency or not, it is critical to make sure you understand:
1. Cryptocurrency is not centrally controlled or managed
Unlike the dollar, there is no central bank or government-backed institution managing the distribution and flow of bitcoin in the marketplace. Depending on your perspective and preferences, this is either an extremely exciting or extremely troubling fact.
2. Cryptocurrency may attract money launderers
Currencies such as bitcoin rely on technology and market competition to control the playing field. Such an honor system may attract individuals and organizations who traffic in money laundering, taking advantage of the lack of central authority and regulation to go unnoticed.
The recent indictment of three individuals in a $25 million crypto card ICO fraud scheme highlights the types of activity that the little-regulated cryptocurrency market can potentially attract (source).
3. Some governments may opt to shut it down
Authoritarian regimes such as China have already taken steps to crack down on the trading of cryptocurrency. Regulatory crackdowns are also being considered in more democratic countries such as Canada. This has the potential to limit the scope of bitcoin trading around the world. On the flip side, in countries that do not regulat bitcoin and other cryptocurrencies, a market exists to reach consumers who do not trust traditional banks.
4. Cryptocurrency can only go so far without further investment
To take the next step toward the mainstream, it will be necessary for major developers to step forward and invest in the infrastructure necessary to facilitate massive growth. Without that, cryptocurrency will remain on the financial fringes as a tool of the technologically plugged-in.