Cryptocurrency begins moving into the mainstream, presents risks and rewards

BOSTON — What started as a financial novelty is moving into the mainstream as more people buy and sell cryptocurrencies like Bitcoin.

Tempting stories of making a lot of money fast are all over social media.

“I believe that cryptocurrency is the future,” said Will Manning, a junior majoring in finance at the University of Delaware.

Over the last year, Manning embraced that future. He now invests in cryptocurrency, and so do many of his friends.

“It’s just fun in the sense that I talk to my friends about what they’re buying into,” said Manning. “We bounce ideas off each other.”

The idea of turning a quick profit is drawing throngs of investors to this new world of finance.

“Cryptocurrency is basically a digital form of money,” explained Ted Rossman, a senior industry analyst at creditcards.com. “So, it’s not paper bills or coins. It’s all digital and not tied to any specific government.”

That makes it much different than those traditional greenbacks we’re accustomed to using.

Rossman said an investor is actually buying shares online of something that has a limited quality.

If demand for Bitcoin or another currency goes up, then so does the value and vice versa.

“It’s worth whatever somebody is willing to pay for it, and in a sense, it’s very much like gold,” added Rossman. “It’s kind of a precious commodity.”

Rossman said some people have made a tremendous amount of money on cryptocurrencies. Much of it is hypothetical, however, because they haven’t cashed out yet.

According to Gemini, a cryptocurrency exchange, 14 percent of Americans currently trade in this market. They expect that number to double in 2021. The majority of investors are women.

But just like the stock market proves every day, what goes up can come down.

“It’s incredibly volatile,” said Northeastern University professor Ravi Sarathy.

Sarathy specializes in international business and strategy and is currently writing a book on cryptocurrency. He said this type of asset should play a role in a sophisticated investor’s portfolio. He cautioned that many people appear to be getting swept up in the hype.

He said it might be ok for someone who’s young and has a few thousand extra dollars and “are consciously saying it’s like going to Vegas and if I lose the whole stash, I won’t be upset beyond feeling momentarily lousy.”

Still, cryptocurrency is definitely picking up steam. Venmo just started letting users buy crypto on their app. Visa and PayPal allow customers to pay for purchases this way. Tesla will even let a shopper take a car off the lot by paying by this method.

Rossman said this trend will present some challenges for shoppers.

“Cryptocurrencies are an investment, so there is capital gains tax. It’s basically like you’re buying or selling stocks every time you make a purchase. The IRS wants their cut.”

Some credit cards are now letting customers take their rewards points in cryptocurrency. Rossman said this could become popular because it lets people dabble in this market without the fear of losing a lot of their money.