Over the last few months, there has been a lot of media talk about the rise and rise in value of cryptocurrencies. And in case you are not familiar with the term cryptocurrency, perhaps the best known of the many on the market is Bitcoin. Others include Ethereum, Litecoin and Dogecoin.
In the case of Bitcoin, its value has risen from about €300 in November 2015 to about €48,000 today. In other words, €1,000 worth of Bitcoin in 2015 would have grown to about €160,000 today. Its little wonder with such growth that so many people are piling into buying Bitcoin. But many are doing so because they are merely following the crowd, as was the case in the late 1600’s in Holland when the so-called ‘Bulb Bubble’ investment mania burst leaving many to lose their life savings.
Basically, cryptocurrencies are not currencies at all. They are high risk investments. The definition of currency it must meet three basic tests; unit of account, store of value and medium of exchange and cryptocurrencies do not meet all three. Also, 'cryptos' as they are sometimes referred to are unregulated and if you take the best known one, Bitcoin, how it is originated is both mysterious and from an environmental perspective, devastating.
At their core is a really expensive 'mining' process where blockchain validation is used to verify people that solve a problem and by doing so, are rewarded Bitcoin. Of course, for the majority of people, buying Bitcoin is done from existing stock, not mined!
Probably what is most valuable in the entire process is the blockchain aspect, and this is what has the greatest potential to impact our day-to-day lives...in finance, in investing, in medicine, art, property transactions and so on...not the Bitcoin.
With all investments, it is important to research the investment risk and seek out expert, independent financial advice. At the core of good investing is diversification, which is the process of spreading risk across multiple investment assets, including equities, bonds, property and even commodities. Without diversification, the risk of loss increases.
So, when it comes to the types of investments that include cryptocurrencies, despite their valuation growth over the last number of years, it is important that there is an understanding that they are high risk investments that can soar and even crash in value. Keep this in mind if you are exploring it as a possible investment option!
Over the last few months, there has been a lot of media talk about the rise and rise in value of cryptocurrencies. And in case you are not familiar with the term cryptocurrency, perhaps the best known of the many on the market is Bitcoin. Others include Ethereum, Litecoin and Dogecoin.
In the case of Bitcoin, its value has risen from about €300 in November 2015 to about €48,000 today. In other words, €1,000 worth of Bitcoin in 2015 would have grown to about €160,000 today. Its little wonder with such growth that so many people are piling into buying Bitcoin. But many are doing so because they are merely following the crowd, as was the case in the late 1600’s in Holland when the so-called ‘Bulb Bubble’ investment mania burst leaving many to lose their life savings.
Basically, cryptocurrencies are not currencies at all. They are high risk investments. The definition of currency it must meet three basic tests; unit of account, store of value and medium of exchange and cryptocurrencies do not meet all three. Also, 'cryptos' as they are sometimes referred to are unregulated and if you take the best known one, Bitcoin, how it is originated is both mysterious and from an environmental perspective, devastating.
At their core is a really expensive 'mining' process where blockchain validation is used to verify people that solve a problem and by doing so, are rewarded Bitcoin. Of course, for the majority of people, buying Bitcoin is done from existing stock, not mined!
Probably what is most valuable in the entire process is the blockchain aspect, and this is what has the greatest potential to impact our day-to-day lives...in finance, in investing, in medicine, art, property transactions and so on...not the Bitcoin.
With all investments, it is important to research the investment risk and seek out expert, independent financial advice. At the core of good investing is diversification, which is the process of spreading risk across multiple investment assets, including equities, bonds, property and even commodities. Without diversification, the risk of loss increases.
So, when it comes to the types of investments that include cryptocurrencies, despite their valuation growth over the last number of years, it is important that there is an understanding that they are high risk investments that can soar and even crash in value. Keep this in mind if you are exploring it as a possible investment option!