Cryptocurrency as Money and Investment

If you see cryptocurrency as “just another kind of money,” you're not seeing the whole picture. Coin Pursuit will check out the two roles it plays.

When it comes to traditional government-issued currency like the US dollar, it serves one basic purpose; it's a tool for purchasing goods and services. Traditional currency is not generally considered an investment in and of itself, though it's used to buy stocks and commodities. It's this basic difference between traditional and cryptocurrency that can create a little confusion for those who are new to the field.

On the one hand, digital currency functions exactly like traditional currency; you can use it to make purchases from any merchant or vendor who accepts it as legal tender. There are already thousands of them out there, and more are signing on all the time—so your options are vast and expanding. In that respect, cryptocurrency works just like the regular bill-and-coin money in your pocket. One thing to note here is that the purchasing power of your cryptocurrency may vary depending on the traditional currency it's being compared to; for example, as it gains independently in value, it will be worth more US dollars than it was when you bought it.

In addition, alternative currencies are also traded on their own marketplace just like commodities such as gold or silver. Investors will purchase them and follow their trends and market value just as they would the items in a stock portfolio. Those who look at it strictly as an investment often allow it to stay put and (hopefully) accrue in value, keeping a close eye on the markets day-to-day. Such investors may choose not to spend a “penny” of their digital currency; however, most investors do a little of both—they set some aside as an investment and keep some as “spending money.” Striking such a balance gives investors the best of both worlds, and takes advantage of both aspects of these currency systems.

Next Cryptocurrency Topic: Digital Currency's International Appeal

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