Bitcoin has just reached $15k* and has nearly doubled in value in over four weeks. It’s nearly up 15 times since the New Year! You read on the internet all these people who have become millionaires through Bitcoin and you want to get in the action.
Before FOMO (Fear Of Missing Out) fully takes hold, consider the risks before jumping in as the risk of losing your money is quite high.
Bitcoin and cryptocurrencies are unregulated at the moment. Some liken them to a “Ponzi Scheme”, whilst other believe it to be a revolution. Any action taken by government can have a dramatic impact on the price. What if the USA or China all of sudden decided to ban Bitcoin? Imagine what it will do to the price
Getting your money stolen
If you own BHP shares, it’s pretty unlikely for someone to steal those shares from you. Not so with Bitcoin.
Bitcoin can be stored in a number of ways. You can store your Bitcoin in the exchange you bought it from. You can transfer your Bitcoin to your soft wallet in your PC or to a hardware wallet and take it off line. Unfortunately storing your currency in the exchange or even in your PC could be subject to hacking and stolen. Google “Mt. Gox”. Even the North Koreans have an army of hackers who have been known to hack numerous accounts to steal Bitcoins.
Bitcoin has massive scaling issues. It cannot even come close to be able to process a fraction of the transactions that Visa and MasterCard can process. Its transaction fees can be quite high. All of which can halt mass adoption, and may lead to its demise. Of course, many are saying that Bitcoin is the digital equivalent of gold and will merely act as a store of value.
It’s not uncommon to price increases of 10-20% or more in a day. On the flip side, the price can go down just as quickly. If you get stressed out with price fluctuations, then have a second thought before investing in Bitcoin or other cryptocurrencies.
How high can it go?
Many proponents of Bitcoin have said this is just the beginning. There are many priced predictions out there in the internet. The price of Bitcoin just going back to January 2016 was just $600 and now it is at $15,000*. That’s a 25 fold increase. A 25x increase from $15,000 will take the price to $375,000. So if you want to be a “Bitcoin Millionaire”, you will need to buy $40,000 worth of BitCoins and hope it goes up 25x. It can easily go the other way.
Investing in Bitcoin is probably more exciting than looking at your superannuation or life insurance. Hey, who wouldn’t want to see their super fund double in value in over a month!
You will not get too many professional financial planners providing financial advice on Bitcoin and how it can help you achieve your financial goals. It’s just too risky at the moment.
If you really must invest or just take a punt, then always do your research and your due diligence. Don’t put in more than what you are prepared to lose. And definitely don’t sell the house to buy bitcoins. Trust me, someone has done this!
AFP® ,B.Bus(Acc), B.Comp, DFP, ADFP
Accredited Aged Care ProfessionalTM
Authorised Representative No. 1238040
*Price of 1 Bitcoin at 12.00 am 30/11/17 was $15,110 AUD.
Disclaimer: Information on this site may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.
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