Understanding Cryptocurrency Savings Accounts

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Knowledge Hub

Finance & Money

5 min read

Understanding Cryptocurrency Savings Accounts

Finance & Money March 02, 2022 By Budget Insurance

Understanding Cryptocurrency Savings Accounts

Finance & Money March 02, 2022 By Budget Insurance

Most things have gone virtual these days, even money! And while there’s nothing like the feel of crisp banknotes between your fingers, missing the cryptocurrency boat could mean losing out on maximised savings. Here’s everything you need to know.

How cryptocurrency works

Cryptocurrency is virtual money. It’s protected by cryptography, a process that makes it almost impossible to counterfeit. This means it’s a secure currency to pay for goods, invest and trade.

Bitcoin, ether and Litecoin are cryptocurrencies commonly bought and traded in South Africa. To buy cryptocurrency you’ll need a ‘wallet’ that exists in apps like Libertex or AvaTrade. Once you’ve created an account, you’ll be able to exchange real money for cryptocurrency.

Every wallet has a public key and a private key. The private key is a code that identifies the wallet in the cryptocurrency network and must be kept in a very safe place. The public key can be thought of as banking details. You can give it to anyone to receive money.

Cryptocurrency prices vary depending on the type of currency you choose (e.g. bitcoin is the most expensive at the moment).

Is it safe to invest in cryptocurrency?

A crypto savings accountworks like a regular savings account. You can deposit crypto, grow your savings over time and earn interest. Interest rates vary depending on the type of currency you choose. Here are some things you should keep in mind before getting started with crypto:

Investing in crypto could be risky, as its value can drop significantly at any time.
You can’t easily withdraw money from a cryptocurrency savings account the way you would with a normal account.
Cryptocurrency isn’t insured, so if anything goes wrong, you won’t have anything in place to minimise your financial loss
The only way to make ‘real money’ from cryptocurrency is to sell it for cash.

Is cryptocurrency for you?

Although there are risks involved with trading and investing in cryptocurrency, you could achieve high returns, meaning it could be much more cost-effective than a traditional savings account. For instance, bitcoin’s value hit an all-time high in November 2021 of over $68,000 (R1,058,182).

Before deciding whether crypto is right for you, speak to a financial expert who can advise you on safe investments.

And remember to keep your eyes peeled for the latest cryptocurrency news so that you can gain a better understanding of this revolutionary virtual money.

Note: Don’t be tempted by the possibility of huge returns if you don’t have the funds. You could lose a lot of money if you aren’t careful. If you decide to make this kind of investment, use funds you can afford to risk on the crypto market.

For more finance tips, visit our blog.

The information in this article is for information purposes only and does not constitute professional advice.

References:

https://www.forbes.com/sites/robertfarrington/2020/11/02/cryptocurrency-savings-accounts-will-this-new-trend-help-you-boost-earnings/?sh=7d4843c0237f

https://www.forbes.com/advisor/investing/what-is-cryptocurrency/

https://techcentral.co.za/whats-driving-the-cryptocurrency-boom-in-south-africa-oveprom/205944/

https://www.moneyweb.co.za/financial-advisor-views/should-you-be-dipping-your-toes-into-crypto-based-investments/