Bitcoin, the original cryptocurrency is by far the most dominant, with the total value of bitcoins circulating now measured in the trillions of dollars.
But there is generally no underlying physical asset that determines the value of a cryptocurrency. This means that its value is largely driven by speculation and what people will pay for it.
Cryptocurrencies are a type of asset that exists in digital form and can be managed, stored or transferred typically using a distributed ledger (such as a blockchain). Encryption technology is used to control the amount of currency issued and to record ownership and payments.
Because it is decentralised by nature, there’s no control by a single entity such as a government, bank or financial institution – there are no restrictions on who can issue them. For some, cryptocurrencies are attractive because they give access to financial services without the need to rely on traditional financial institutions such as banks.
Crypto also offers the possibility of faster transactions and lower fees compared to conventional financial transactions.
Many are attracted to crypto investing by the possibility of high returns as they increase in value. Early adopters of cryptocurrencies like Bitcoin have witnessed substantial gains, drawing more investors to explore such digital assets.
So while using crypto to pay for everyday goods and services is still limited, cryptocurrencies are gaining acceptance as investments and payment options by financial institutions and businesses.
Crypto isn’t specifically regulated here in New Zealand, and international laws and regulations vary widely from country to country. While there are some basic consumer protections when you put your money into most other financial products – this may not be the case for crypto investments.
