Cryptocurrency can be a good investment if you are willing to accept that it is a high-risk bet that could pay off, but also that there is a big chance that you will lose all your money. Cryptocurrency is a good investment if you want to gain direct exposure to the demand for digital currency. A safer but potentially less lucrative alternative is to buy shares in companies with exposure to cryptocurrencies. If you believe in blockchain technology, cryptocurrency is a great long-term investment.
Bitcoin is seen as a store of value, and some people think that Bitcoin can replace gold in the future. Interestingly, Bitcoin is the only leading crypto project that has an anonymous creator and is based solely on organic growth, which has resulted in it being the most meritocratic cryptocurrency on the market. Cryptocurrency is a relatively risky investment, no matter how you divide it. Generally speaking, high-risk investments should make up a small part of your overall portfolio; a common pattern is no more than 10%.
You may want to look first to shore up your retirement savings, pay off debt, or invest in less volatile funds composed of stocks and bonds. If you're not willing to lose the money you invest in cryptocurrencies when buying on an exchange, you shouldn't put it in a cryptocurrency fund either. In the world of cryptocurrencies, mining occurs when people use their computers to solve supercomplicated mathematical problems that ensure that new crypto transactions are correct. However, cryptocurrency exchanges are still at risk of being hacked, and unless you store your cryptocurrency in a hardware wallet, you won't be completely safe from bad actors.
The Internal Revenue Service (IRS) treats cryptocurrencies as a financial asset or property and will treat properly documented gains and losses in cryptocurrency settlement just like other assets.