What is Cryptocurrency and should I invest in it?

The Cryptocurrency industry has flourished in recent years due to its capability of transferring from one entity to another with ease. This form of currency is not issued by any banks or financial institutions.

A Cryptocurrency is a digital or virtual currency that is protected by encryption, making counterfeiting and double-spending practically impossible. Another benefit that many appreciate over the traditional form of money.

Bitcoin is currently the most popular type of cryptocurrency right now followed by Ethereum and Cardano.

The first form of cryptocurrency, Bitcoin, was launched in 2009. It only gained traction in recent years and its sudden popularity forced the UK government to find other ways to regulate it through taxation.

As of 2021, the Bitcoin market is worth £479 billion.

Are there any disadvantages of investing in Cryptocurrency?
Here are the following disadvantages of trading this form of currency:

The cryptocurrency industry experiences major fluctuations consistently

Because the market is so volatile, it is extremely unpredictable. Investing in cryptocurrencies without first comprehending the risks might be dangerous. A number of people are still unsure about this digital currency due to the turbulent nature of this market.

Issues with storage security

Cryptocurrency is money that you can't put in your wallet and touch; it's a digital currency. And there is the crux of the storage issue. There are many different ways to store money nowadays, and one of them is to utilise a digital wallet.

Due to the rigorous integration of the encrypted blockchain, it is hard to recover lost data if a user forgets his password in the wallet, which can be a major issue for its users.

It is not regulated

Many people are attracted to the concept of investing in cryptocurrencies due to the lack of strict regulation.There are no standards in place to protect your business because the cryptocurrency market is not regulated by the government or another institution.

Why should I invest in Cryptocurrency and which currency should I invest in?
The cryptocurrency sector is incredibly successful, and trading inside it might be a very profitable option for you. The unpredictable nature of cryptocurrency may dissuade some people from investing or trading, but there are a slew of benefits that should persuade you to start acquiring these financial assets right now.

We'll go through a few of the most important benefits here:

You have complete ownership, there is no ‘Middleman’

Brokers, agents, and legal representatives can add significant intricacy and price to what could otherwise be a simple transaction in traditional commercial interactions. There's paperwork to deal with, brokerage fees to pay, commissions to pay, and a slew of other specific conditions to consider.

One of the benefits of bitcoin transactions is that they are one-to-one, taking place on a peer-to-peer networking structure that makes "cutting out the middleman" a common practise.

This results in more clarity when it comes to creating audit trails, less uncertainty about who should pay what to whom, and higher accountability because both participants in a transaction are aware of who they are dealing with.

Cryptocurrency has a high level of security

Once a bitcoin transaction has been authorised, it cannot be reversed, unlike credit card companies' "charge-back" transactions. This is a safeguard against fraud that necessitates a written agreement between the buyer and seller on reimbursements in the event of a mistake or a return policy.

Finally, the powerful encryption measures used throughout the distributed ledger (blockchain) and cryptocurrency transaction procedures protect consumers from fraud and account tampering while also ensuring their privacy.

There are a multitude of cryptocurrencies available

Over 1200 different cryptocurrencies or altcoins are currently in use around the world. Many are short lived, but a large number were built for specific use cases to demonstrate the versatility of the bitcoin phenomenon.

There are “privacy coins” that allow you to hide your identity on the blockchain, as well as supply chain tokens that can aid supply chain operations in a variety of businesses.

Will current taxes affect Cryptocurrency?
HMRC has updated its rule books and created a Cryptoassets Manual, which explains how such assets are taxed.

Since 2014, HMRC has been paying attention to the rise of cryptocurrencies. At the time, cryptocurrency was not commonly used or accepted in payment for goods or services, and HMRC saw it as a "speculative investment" or a "game of chance," with no tax procedures in place to regulate it.

A question about any crypto assets held by a taxpayer has been added to the statement of assets form. HMRC's commitment to find all sources of wealth a person may have is exemplified by this method.

Cryptocurrency may sound confusing to most people and it may deter many from investing into it. For more information on how to trade and invest effectively, please contact Persona Finance [enquiries@personafinance.co.uk] or for other business and accounting queries.