What is Crypto and is it a “Good” Investment?

What is Crypto & is it a “Good” Investment?

You've probably heard your friends talking about Bitcoin, seen crypto ads or heard stories about people who made (or lost) thousands of dollars. But what exactly is cryptocurrency, and should you be investing in it? Let's break it down.

What is Cryptocurrency?

Simply put, a cryptocurrency is a digital or virtual currency secured by cryptography (form of cybersecurity), which makes it nearly impossible to counterfeit or double-spend (Investopedia Team, 2025). Similar to money in a bank account, you can’t physically hold it, but you can purchase goods with it. The main difference? Cryptocurrencies exist on decentralized networks that utilize blockchain technology, a distributed ledger secured by a network of computers (or nodes). No bank or government has control.

Blockchain technology is central to the appeal and functionality of cryptocurrencies. Imagine a notebook that everyone can read, but nobody can erase or change what's already written. Every time someone buys or sells cryptocurrency, it is recorded permanently in this notebook. This network-wide validation makes it nearly impossible to forge transactions (Investopedia Team, 2025).

Is it Legal in Canada?

While the Canadian government does not consider cryptocurrency to be legal tender, it is legal to purchase and use. The Canada Revenue Agency (CRA) classifies it as a commodity for tax purposes. However, in Canada, 50% of your crypto capital gains are taxable at your combined federal and provincial income tax rate, with any action (i.e selling, trading, or using for purchase) triggering capital gains (Canada Revenue Agency, 2023). For example, if an individual realizes a capital gain of $10,000, the CRA will include only $5000 (50% of the gain) in their taxable income for the year.

So What's the Appeal in Crypto?

Cryptocurrencies promise to facilitate direct transfers of funds between two parties without requiring a trusted third party, such as a bank or credit card company (Investopedia Team, 2025). Because they do not use third-party intermediaries, cryptocurrency transfers between two transacting parties can be faster than standard money transfers. The remittance economy (i.e., money transfers back home or receiving transfers to pay for tuition) is testing one of cryptocurrency's most prominent uses, with cryptocurrencies such as Bitcoin serving as intermediaries to streamline money transfers across borders. Sending money internationally? Crypto can do it in minutes instead of days, often with lower fees.

What are the Risks?

Cryptocurrencies can face extreme volatility. Bitcoin has been characterized by its significant fluctuations in value. Climbing to nearly $80,000 CAD in November 2021 before dropping to just over $50,000 a year later (Yahoo Finance, n.d.). However, Bitcoin prices had roared back by mid-2024 and reached an all-time high of more than $175,000 by October of 2025 (Yahoo Finance, n.d.). Making matters worse, market manipulation continues to pose a significant challenge for investors, as influential individuals, organizations, and exchanges promote their favored tokens. This creates an environment where prices can be easily swayed, undermining confidence and stability in the market.

The Bottom Line

The benefits brought by cryptocurrency are real, including financial independence and efficient money transfers. Despite the asset's speculative nature, some have created substantial fortunes by taking on the risk of investing in early-stage cryptocurrencies. However, for university students, the risks currently far outweigh the rewards. The extreme volatility and lack of investor protections make crypto unsuitable for someone building their financial foundation.

References

Canada Revenue Agency. (2023, December 13). Information for crypto-asset users and tax professionals. Canada.ca. https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/cryptocurrency-guide.html

Investopedia Team. (2025, August 28). Cryptocurrency explained with pros and cons for investment. Investopedia. https://www.investopedia.com/terms/c/cryptocurrency.asp

Yahoo Finance. (n.d.). Bitcoin USD (BTC-USD) price history & historical data . https://ca.finance.yahoo.com/quote/BTC-USD/history/