While many were initially skeptical of digital assets competing with traditional assets, cryptocurrencies have become increasingly popular. The trend started with some big names in the cryptocurrency world, but new coins are being introduced every year. However, the sudden emergence and popularity of new currencies has far-reaching consequences, starting with banks and ending with customers like you. Understanding where cryptocurrencies come from and how they interact with modern banking is essential if you want to keep your money safe for years to come.
What are cryptocurrencies?
You’ve presumably heard the expression “digital currency” every once in a while, however, what does it truly mean? Basically, digital money is a kind of cash that exists completely on the web. It has no actual physical form but exists on a blockchain on a server, which stores data about block transactions without personally identifying factors. They are not backed by a bank or other traditional lending institutions, and transactions are highly encrypted to keep personal information private, no matter which transaction is made. However, they cannot be used for all online purchases. Most of the time, they are acquired as a form of investment and not as a way to guarantee purchases in online stores.
How did cryptocurrencies become popular?
While the security of online transactions was a definite selling point, it was the investment opportunities that captured the attention of the masses. For those who could not take advantage of traditional banking products, easy access to online cryptocurrency offered this group of people another way to invest. There are several advantages to investing in cryptocurrency, including:
- Avoid fees
- Easy access to a wide range of investment opportunities
- Direct investment control
Because of these advantages, Bitcoin and other cryptocurrencies went from skepticism in 2009 to a sought-after resource less than a decade later.
What are the disadvantages of cryptocurrencies?
Cryptocurrency may seem like a beneficial opportunity, but it has its downsides. Some of the big cons to consider include:
- Cyber security
- Lack of regulation and control.
- Volatile value
- Lack of intrinsic value
- Infrastructure stability issues due to rapid growth
How does cryptocurrency compare to traditional investing?
As cryptocurrency investing grows in popularity, more and more people tend to choose the more convenient option. Consequently, many who could invest in more traditional ways have turned to cryptocurrencies. That means less activity for banks and investment firms, which in itself has far-reaching consequences.
However, as the value of cryptocurrencies is not guaranteed by anything, investments can be very unpredictable. This is one of the reasons why these currencies cannot replace a local bank. Although they offer an investment opportunity, they cannot provide you with the necessary stability regarding your money. Also, this currency cannot secure mortgages, loans or other services that you will need throughout your life. That’s why it’s important to keep working with your local bank even if cryptocurrency catches your eye.
How does this affect bank customers?
While cryptocurrencies are new and exciting, they simply cannot meet consumer demands. Cryptocurrency cannot be used to secure a mortgage, car loan or any other financial need you may have. For these forms of financial support, it is imperative to work with your local bank.
Keeping your money in a bank gives you easy access to funds when you need them, and you won’t be tied to a currency investment that could lose value at some point. While it may mean the minor inconvenience of visiting your branch every now and then, you’ll benefit from easier access to the services you need, as well as greater security for your hard-earned money.
To know more
In short, while cryptocurrency is more convenient than traditional banking and investment options, it is not as secure as using your local bank. By using your bank, you can be confident that your money will retain its value, and practices related to how your money is invested are strictly regulated by federal law. Still, if it’s security you’re looking for, finding a local bank branch is your best bet.