Wouldn’t it be nice to have a source of income that wouldn’t chain you to your nine-to-five job even further? If you want to be more financially independent and earn more while spending less time working, cryptocurrency might be enough to turn your dream into reality.
Cryptocurrency is no longer just a buzzword – it’s a tool that helps people build up an investment portfolio and gain that financial freedom they so desperately crave. Here’s everything you need to know about the crypto landscape before deciding whether you want to use it to improve your finances in 2025:
Crypto 101 – Covering the Basics
A cryptocurrency is a form of secure digital or virtual currency. Cryptography—the practice used to ensure the security of crypto transactions—makes it nearly impossible to counterfeit and intercept transactions.
One of crypto’s main characteristics is its decentralized nature. Most cryptocurrency, like Bitcoin, exists on decentralized networks that use blockchain technology, which uses a peer-to-peer network to perform verification. Since crypto works without the interference of any third-party, like government or banks, the theory is that digital currency is immune to government manipulation.
If that motivates you to learn how to buy Bitcoin anonymously, then you are definitely not alone. Bitcoin transactions are not tied to a person’s real-world identity. Along with anonymity, pseudonymity is a significant term in the crypto industry, as it provides another layer of protection. Bitcoin is pseudonymous, meaning its transactions are tied to wallet addresses and not real names.
Cryptocurrency Pros
Cryptocurrency is one of those phenomena that has experts divided. While the world waits for them to decide whether crypto is something that will soon be used by every household or a fad, the numbers speak for themselves. The global user base of cryptocurrencies increased by nearly 190% between 2018 and 2020, with the rise of crypto being further accelerated in 2022.
Such a large user base enabled the world to make a clear distinction between the positive and negative aspects of digital currency. If you are still on the fence whether or not to invest in crypto, the following advantages might help tip the scales in either direction:
- Unparalleled security
- Inflation protection
- Cross-border payments
- Potential for high returns
#1. Unparalleled security
Cryptocurrency is inherently safe, as these networks are secured by cryptography. However, the level of security between different cryptocurrencies varies, depending on the hash rate, among other things. Digital assets with a high hash rate would require serious computing power to compromise the network – or hack it, in other words.
Unsurprisingly, the cryptocurrency with the highest hash rate is Bitcoin. It operates at a hash rate of roughly 150,000,000 TH/s, testifying to the network’s serious computational power.
#2. Inflation protection
Even though the core inflation rate has slowed down to 3.2% in December, putting the 12-month inflation rate at 2.9%, inflation is still a huge problem for the US residents. Unevenly rising prices can reduce the purchasing power of some consumers, bringing about a financial crisis for a significant portion of people. With cryptocurrency like Bitcoin, investors don’t have to worry about sudden inflation and the consequences it inevitably brings.
Since there’s a limited number of most cryptocurrencies, these digital assets are usually considered as a hedge against inflation. Once again, take Bitcoin as the perfect example of an inflation hedge. Bitcoin halving—known as an event that takes place every four years—reduces the block reward by 50%, along with the number of BTC in circulation. That’s why the price of Bitcoin has historically registered a substantial rise approximately six months after the past three halving events – the effects of the latest event are still in the process of unfolding.
#3. Cross-border payments
Sending money from country A to country B can be a complicated process filled with extra costs and financial hurdles. Some payment methods make it almost impossible to plan your finances when sending money abroad, as you’ll be hit with extra fees when you least expect. With crypto, there’s no longer a need for a third party like Western Union, as you can enjoy simple and low-cost cross-border transactions.
Crypto doesn’t differentiate between local and international payments, as all transactions come with the same fee. The fact that you get to avoid any red tape or paperwork is only a cherry on top.
#4. Potential for high returns
The exact returns for cryptocurrency are difficult to predict. Bitcoin, once again, serves as a shining example of how purchasing cryptocurrency now can help you improve your finances five years down the line. The five-year performance of Bitcoin shows that it has returned a massive 1,416%, which is 21x higher in comparison to the broad US stock market.
Generally speaking—meaning not comparing any specific cryptocurrency to a specific stock—crypto has proved to be a better investment than stocks in the past five years. Although, keep in mind that this trend can end at any time, as both crypto and stocks are unpredictable.
Cryptocurrency Cons
Think you’ve already made your decision? Not so fast! Here are some cons that you should take into consideration, as well:
- High volatility
- No regulations
- Cyber attacks
#1. High volatility
Volatility is one of the main terms associated with cryptocurrency. It refers to how quickly its price can change, with high volatility signifying rapid changes. With highly volatile crypto, investors can expect the price to change on a daily, sometimes even hourly basis.
While volatility affects everyone, the ones that have to worry the most are short-term investors. Long-term investors can also be affected if they panic during a market crash and attempt to salvage what’s left of their investment by selling their coins. Many times, crypto gets worse before it gets better, so investors are advised to be patient and wait it out.
#2. No regulations
Even though Bitcoin—the first cryptocurrency—has been in circulation since 2009, the crypto ecosystem is still relatively new. Due to decentralization and the novelty surrounding crypto, the market is still not very regulated. There’s a chance that might change in the future, leading to many governments banning crypto. In an attempt to prevent money laundering, China has already decided to ban cryptocurrency, and there’s a concern that other countries will follow suit. If that happens, investors’ coins will generally become obsolete.
The good news is that there are no indications something like that will transpire in the USA, especially with Donald Trump being elected as the President. The crypto industry is getting everything it ever wanted, as Trump’s announcement about wanting the government to purchase and hold a variety of digital currencies has resulted in prices jumping exponentially.
#3. Cyber attacks
The digital provenance of crypto makes it very susceptible to hacking. Extremely skilled hackers can steal digital currencies from online wallets or change their protocols, making it nearly impossible to recover your assets. If you’ve been working on building a retirement safety net with crypto and a hacker were to target your digital wallet, you’d suffer from a significant loss.
Before you start panicking, you should keep in mind that, while they can be disastrous when successful, crypto cyber attacks are still rare. There have been no reports of Bitcoin’s network and blockchain being hacked as of May 2024, although the same can’t be said for digital wallets and service providers.
Improving Your Finances With Crypto – Where to Start?
If you’ve decided you’re ready to assume the risks that come with crypto, it’s important to learn where to start. Your investment journey can start with:
- Assessing your risk tolerance. You know that cryptocurrency inevitably means risks – but how far are you willing to go? Will you do okay with significant market fluctuations or do you prefer more stable coins? Assessing the size of your risk appetite will help you set goals you can achieve.
- Selecting a platform. Before embarking on your crypto journey, one of the main things to do is choose which platform you want to use to buy your first asset. With dozens of crypto platforms in circulation, like Kraken and Coinbase, you’ll want to prioritize those that are secure and user-friendly.
- Thinking about diversification. It’s never a good idea to put all of your eggs in one basket. To minimize the risks of volatility, many investors choose to diversify their portfolio and divide their money across different coins. You are the only one that gets to decide how to enhance growth opportunities, but you can hardly go wrong by investing in a mix of established coins, like BTC and ETH, and other crypto assets.
- Adapting your strategy to market conditions. Crypto market trends change on a yearly basis. It’s likely that you’ll encounter periods of downturns if you hold onto your coins long enough, so it’s important to learn how to act during them. By learning how to adapt your strategy to market conditions, you’ll be able to profit from them and protect your investment.
- Going in with a long-term mindset. Investing in cryptocurrency shouldn’t be a sprint – it should be a marathon. Adopting a long-term mindset will help you make the most out of your investment by smoothing out volatility. The crypto market is characterized by rapid changes, but long-term investors tend to catch at least one good wave when their cryptocurrency of choice is doing exceptionally well and profit from it.
Meme Coins – Are They Worth It?
Meme coins have been a buzzword in the crypto ecosystem for a while now. Even the current US president, Donald Trump, has joined the hype, resulting in the launch of his official meme coin called $Trump. With that in mind, it’s understandable why you might be tempted to spend the entirety of the money intended for your investment portfolio on them.
Besides, meme coins do have their advantages, such as:
- Being supported by strong community engagement.
- Building a sense of community.
- Having a humorous origin.
- Being associated with certain cultural phenomena.
- Generally less expensive than established cryptocurrency.
While it’s not forbidden to invest in meme coins, you should always keep in mind they are for entertainment purposes only. Meme coins have very little real-world value, even though some of them can have staggering market caps that stand well above the $1 billion mark.
Meme coins are built on hype, with people remembering stories about individuals becoming millionaires after investing all of their life savings in a single coin. Those stories aren’t false, as some were actually lucky enough to invest in Dogecoin and Shiba Inu at precisely the right time.
But there’s a catch – this lucky break came years ago, when there weren’t as many meme coins in circulation as there are today. With hundreds of thousands of meme coins present at the moment, it’s highly unlikely that you’ll turn a $100 into $1,000,000.
So to answer your question – no, meme coins are usually not worth it and they don’t have the power to help you improve your finances.
If you are set on buying some of these coins for entertainment purposes, make sure the investment doesn’t take up a significant portion of your investment portfolio. Everything below 5% of your total funds is generally acceptable.
The Bottom Line
Cryptocurrency might have started out as a phenomenon reserved for the most tech-savvy forward-thinkers, but the crypto ecosystem has come a long way since then. Digital currency is becoming integrated into more and more industries, and it’s slowly, but surely, becoming a standard method of payment.
Due to its characteristics, like low fees for local and cross-border payments, unmatched security, and the immense potential for high returns, crypto has become one of the most potent tools for improving one’s financial affairs.
Of course, this statement only holds merit if you don’t disregard the disadvantages of the cryptocurrency landscape, such as high volatility and zero regulations. If you play your cards right, arm yourself with patience to wait for your coin of choice to become the next big hit, and take some precautionary measures to protect your investment, you have a good chance to make it big in the crypto world.
Usually, this means not investing in meme coins, unless the sole purpose of your investment is to have fun. In that case, feel free to purchase as many meme coins as your heart desires.