What is Crypto?
It's quite common for me to get questions about cryptocurrencies (crypto for short) from a lot of people. I'm always exploring new ways to help my clients grow and protect their wealth, whether through IRAs, investment accounts, 401(k)s, or other investments, and crypto comes up a lot. But what exactly is crypto?
Think of crypto as digital money that lives on the internet, powered by technology. Unlike traditional dollars or stocks, it’s not controlled by banks or governments, which makes it both exciting and a bit hard to understand. I'm going to break it down in plain English to help you understand what crypto is and why it’s making so much noise.
Crypto, at its core, is a type of digital currency that uses cryptography—a fancy way of saying super-secure coding—to protect transactions and create new money units. Imagine it like a digital dollar that’s stored in a virtual wallet on your phone or computer. The most famous crypto, Bitcoin, was created in 2009 as a way to send money online without middlemen like banks charging fees and controlling the money. Others, like Ethereum, go beyond money, enabling things like smart contracts (think self-executing agreements for buying a house or trading assets). These currencies run on something called a blockchain, a tamper-proof digital ledger that records every transaction across thousands of computers worldwide.
Why does this matter?
Crypto offers a new way to think about money and investing. It’s decentralized, meaning no single entity controls it, which appeals to folks who value independence or distrust traditional systems. For example, you could send Bitcoin to a family member overseas in minutes, often with lower fees than a bank wire. But it’s not without risks—crypto prices can swing wildly (Bitcoin hit $69,000 in 2021, then crashed to $16,000 in 2022), and scams can happen.
Here is a really cool little explainer video that is super simple and short if you are a visual learner: https://www.youtube.com/watch?v=1YyAzVmP9xQ.
Crypto itself is tough to include in a standard portfolio, but I am working on some ETF assets that are crypto-based that can fit nicely into a portfolio. Due to the high volatility of crypto assets, it is on the higher side of risk, but if this is something you are looking for, or you know someone interested, I am open to walking through it! It's quite fun to learn about all this and is something we all need to be acquainted with in the financial realm as crypto continues to grow in importance.
Happy investing!
Johnny T