Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units.
Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies can be used to purchase goods and services, or traded like stocks on an exchange.
As with stocks, cryptocurrency may offer the potential for a high level of returns, but also the possibility of significant price volatility as well as losses. For these reasons, whether cryptocurrency is a good investment may depend on the profile of the particular investor. For example, a retiree seeking to draw on a stable pool of income may not find highly volatile cryptocurrency appropriate for their portfolio. On the other hand, a younger investor able to tolerate a high level of volatility may consider cryptocurrency to be an important and/or diversifying component of their portfolio.
