Bitcoin has rocketed to new all-time highs this week – but should you invest in the cryptocurrency everyone’s talking about?
It’s in the public spotlight thanks to its meteoric rise.
In recent days, Bitcoin has rocketed to new all-time highs.
But should you invest in the cryptocurrency everyone’s talking about?
Money Saving Expert Martin Lewis has offered his advice – from the advantages and pitfalls of the currency to potential seller scams.
As Bitcoin continues to rocket in value – topping a record-breaking $16,000 for a single unit this week – some original users have made millions.
The currency was the first of what have become known as “cryptocurrencies”.
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These are forms of digital money that use encryption to secure transactions and control the creation of new units, the Derby Telegraph reports.
With companies keen to jump on the bandwagon and entice the public to spend their hard-earned cash on investments in Bitcoins, Martin has taken to his blog to brief consumers on the currency.
“At this point I should say I’ve no expertise on the technology behind Bitcoin or other cryptocurrencies and assets,” the financial journalist warns.
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Here are his four tips to avoid being caught out by the craze:
Don’t invest in something you don’t understand
“If you don’t understand Bitcoin you should not be investing in it,” Martin writes.
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His advice is that, while you might not need to be an expert in the technical details, you need a thorough understanding of what you’re getting into.
He says: “You need to understand how it works as an investment, how liquid it is (ie, can you get out when you want to), the level of risk and what can drive the price up and down.”
His advice is not to invest “just because a friend told you to”, but to do your own research and make the decision that’s right for you.
Where is the demand for Bitcoin coming from?
“To be created, Bitcoins have to be mined and there are meant to be only a limited possible number to be found,” writes Martin.
“The fact it’s a scarce resource leads to the assumption that if demand rises so will the price.”
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It is a gamble
Martin explains that Bitcoin, like stocks and shares, is an investment – albeit, an unregulated one.
“Putting money in it is a form of gambling,” he writes. “That means if it does well, you could make serious amounts – 10, 20, 30 times or more what you put in; or just as possible, if it goes badly wrong, you can lose everything.”
His advice is that investors need to be prepared and consider their attitude to risk before parting with their cash.
Although the value of Bitcoins has rocketed, particularly since the start of 2017, Martin warns that “past performance is no indication of future performance”.
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“It may be that this speculative rise will continue. Which means if you put your money in now you will make a fortune. On the other hand, as we’ve seen often in history – whether it’s the canal mania of the 18th century or the first internet boom – this could just be a bubble, and soon to burst.
“We’ll only know with hindsight – you have to accept the uncertainty.”
Don’t fall for Bitcoin seller scams
“People often ask me if Bitcoin is a scam. No, it’s not. Yet that doesn’t mean there aren’t a lot of scams involved with Bitcoin,” warns Martin.
“Bitcoin isn’t the easiest thing to invest in – you need to buy it and store it safely – and that opens up room for many dodgy people to try to take advantage.
“I would certainly be worried about investing in a company that I’d just spotted because it’s advertising on Facebook – which is rife with scam adverts in many areas – especially if it makes it look like a no-lose option.”
His parting piece of advice is to stress that, if you’re going to buy, do your research and go to “what is hopefully a legitimate Bitcoin seller”.
Courtesy Daily Mirror
