I appreciate so much about Dave Ramsey’s baby step method, but what does Dave Ramsey think about cryptocurrency?
Cryptocurrency is a buzzword that’s been making waves in the world of financing nowadays. However, what exactly does cryptocurrency entail, and what’s Dave Ramsey’s opinion of them? Let’s discuss some of Dave’s take on cryptocurrency.
What is Cryptocurrency?
Dave in his article titled “Investing in cryptocurrency” describes the term as digital assets people use when for online purchases and investments. You’ll trade fiat currencies like euros, dollars etc to purchase “token” or “coins” of chosen cryptocurrency.
Here’s a simpler definition: Cryptocurrency can be compared with swapping your currency with another currency.
How Does Cryptocurrency Work?
Dave, in his YouTube video, says; Cryptocurrency is a unique type of currency that’s exchanged from person to person via the internet without any middleman, such as the government or a bank. Its operations are fully free-flowing, as there’s no central agency to make laws regarding it.
Here’s an illustration of how it works: Imagine hiring a kid within your residence to help mow your garden while you’re temporarily unavailable. It’s possible that you pay them in cash. There’s no need to visit a bank to begin the process for an official transaction. This is exactly how cryptocurrency works.
Cryptocurrencies are decentralized. What it means is that no financial institution or bank controls its value, and the means of exchange.
For this reason, the value of a cryptocurrency hinges on how much value people place on them.
How’s Cryptocurrency Stored?
Dave noted that cryptocurrencies are stored in a digital wallet–often via a vendor or a crypto-trading app. Your wallet gives you a private key, this is a unique code to digitally make a transfer. This is sometimes considered as proof that a transaction is legitimate.
Dave also explained that cryptocurrency is built via a technology called blockchain technology. This is a long receipt that grows with each cryptocurrency exchange. This receipt is a public record of transactions you’ve ever carried out within a cryptocurrency platform. Another better description is a ledger detailing every action that has ever occurred with a currency.
What types of Cryptocurrency platforms are available?
There are many types of cryptocurrencies, however, the most noteworthy of them is Bitcoin. Other alternatives include Chainlink, Polkadot, Mooncoin, Litecoin and over 10,000 alternatives. Let’s discuss the noteworthy ones:
1. Bitcoin
This is the most popular cryptocurrency, and I’m pretty certain that you’ve at least come across that name before. This is primarily because it’s the world’s first cryptocurrency, and has been in existence since 2009.
The currency was created by an unknown person designated by the name Satoshi Nakamoto. However, due to the anonymity of the creator, financial institutions have been extra cautious about dealing with this cryptocurrency. Here are some facts about bitcoin:
- Bitcoin has a market cap of $775 billion;
- There have been 668 million bitcoin transactions;
- Bitcoin is a legal tender in El Salvador
- The last bitcoin will be mined in 2140
2. Ethereum
After Bitcoin, the next most popular is Ethereum. Although Ethereum has very striking similarities with Bitcoin, it has some noteworthy differences. Ethereum is more complex than others as users can “mine” their coins. So you’re probably wondering: What does mining mean?
Dave explains that mining happens in cryptocurrency when individuals and corporate entities make use of computers to perform complicated math problems to ensure that cryptocurrency transactions are executed correctly. This action adds to the blockchain. As people use their computers to solve the problem, they are settled in Ether coins.
Here are some random facts about Ethereum:
- Ethereum is crowdfunded
- Beyond being a cryptocurrency, it can also serve as an ecosystem that aids the functioning of decentralized applications.
- Large businesses support Ethereum
- Attempts as PoS
- Ethereum recently became the second most popular cryptocurrency
- Ethereum is best described as a centralized decentralized cryptocurrency
3. Dogecoin
Dave Ramsey also shares his opinion about dogecoin. Although this cryptocurrency only started in 2013, it’s currently believed as one of the best cryptocurrencies to invest in. A popular meme that’s associated with this crypto is Shiba Inu (a type of dog). The developers of Dogecoin named the currency after this meme, it’s a mascot for the cryptocurrency.
Here are some random facts about Dogecoin:
- Dogecoin was created in just 2 hours
- It has a market cap of $22 billion
- Dogecoin has an unlimited supply
- It is backed by many crypto enthusiasts, with the most noteworthy of them is Elon Musk.
Why Does Dave Ramsey Think about Investing in Bitcoin?
Dave Ramsey believes that no one should risk their investment on things that are unreasonably risky or too complicated. He believes that trendy investments are not necessarily right. Thus, his ideal way of building your wealth is by investing in mutual funds that have a successful history.
He further explained that if you meet your retirement goal by investing 15% of your monthly earnings in a retirement portfolio. Then you may consider other investment options.
Where Can You Buy Cryptocurrency?
Most people see cryptocurrency as an investment. As such, there are lots of people purchasing crypto to keep it till it becomes more valuable in the future. But cryptocurrency is gaining momentum and becoming more accepted as a means of payment.
You can pay with crypto on popular retailers such as:
- Nordstrom
- Etsy
- PayPal
- Expedia
- Whole Foods.
Of course, you can pay via crypto to any individual that values it. Also, you can use cryptocurrencies to buy NFTs. Want to know what Dave Ramsey thinks of NFTs, then read this article.
What Does Dave Ramsey Think about Investing in Cryptocurrency?
In his YouTube video titled “should I invest n cryptocurrency?” Dave Ramsey laid his mind bare on investing in cryptocurrency. Among the noteworthy things he said are:
1. Cryptocurrency is Unstable
One of the most unstable investments to make is cryptocurrency. Its value swings significantly up and plunges back without any signal. Some cryptocurrencies have reached a value of $0 in the past. But for how long–he said. For example, the value of Dogecoin rose to a significantly high level simply due to a single tweet from Elon Musk.
2. It has Multiple Unknowns
A lot still has to be explained on the workings of cryptocurrency. Think about it: even the founder of Bitcoin is unknown! Only a few people have an understanding of blockchain technology, and can truly make a transfer with it.
Dave’s team always says: “You have no business investing in a portfolio that you can’t explain to a 10-year-old.” Although a lot of people invest in a crypto asset, research has shown that it’s just 4% of US citizens that understand crypto.
3. Fraud is Easy with Crypto
With cryptocurrency, you can lose your entire investment in 5 minutes. Since scammers will try their best to access your details, it’s best to safeguard them properly. Also, crypto transactions are not reversible.
Conclusion
Dave Ramsey has covered cryptocurrency multiple times now. Hopefully this article can provide ideas what Dave Ramsey thinks about cryptocurrency.