Should we invest in cryptocurrency?
Weigh the returns and the risks of cryptocurrency before deciding
IN recent months, cryptocurrency, particularly Bitcoin has been a hot topic. When Elon Musk announced that Tesla had bought US$1.5 billion worth of Bitcoin and that Tesla will accept Bitcoin, its price surged 20 per cent to US$42,000. Today, Bitcoin has crossed US$60,000.
Should we invest in cryptocurrency? To answer this, we first have to understand what cryptocurrency is in the context of money.
At Providend, we always say that money is an enabler of life goals. But to be an enabler, money needs to fulfill three fundamental roles: (1) a store of value, (2) a medium of exchange and (3) a unit of account. Today, money has a physical form in notes and coins but strictly speaking, these notes and coins do not have intrinsic value. It is the features that constitute money, collectively agreed upon by people, give money value. There are six characteristics to consider when we gauge the different forms of money:
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