What is Bitcoin?
Bitcoin is a digital currency which can be used to make purchases anonymously, which is not linked to any government, and which is made secure using a cryptographic technology called “blockchain.” It is the first ever cryptocurrency, of which there are now many in the digital marketplace.
While Bitcoins can be used as a currency, many are looking to it as an investment option, with some considering it “digital gold” 1. However, before buying into Bitcoin or any other cryptocurrency, it’s important to understand as much as you can about this volatile new technology.
Should I invest in cryptocurrencies?
Rather than thinking of investing in cryptocurrencies such as Bitcoin, it might be more constructive to think of it as gambling 2. Even Bitcoin.org explains, “Bitcoin is an experimental new currency that is in active development… Be prepared for problems and consult a technical expert before making any major investments, but keep in mind that nobody can predict Bitcoin's future.”
In addition to this unpredictability, which is true to a lesser extent for any
At Financial Plans & Strategies, our service is based on discussing each client’s financial goals and evaluating risk tolerance prior to determining which investment portfolio is the best fit. Because stocks, corporate bonds, and other traditional investment options provide historically positive returns, these types of investments are still the best options for most people’s major financial goals. However, if a client is still interested in buying cryptocurrency, we would advise using only a tiny portion of the overall portfolio and thinking of it as a means of entertainment, not as an investment for long-term returns.
Our office doesn’t offer cyber currency accounts and we can’t purchase bitcoins for clients, so if you are thinking of buying some cyber currency, you would need to establish that type of account independently.
- The Atlantic, November 13, 2017: “Bitcoin Is a Delusion That Could Conquer the World” by Derek Thompson
- CNBC, December 8, 2017: “Jim Cramer, Kevin O'Leary
andTony Robbins agree: This is the best reason to invest in bitcoin” by Ali Montag
- com, January 25, 2018: “Cryptocurrencies See Another Shocker: A $6 Million Ponzi Scheme, According to Officials” by Erik Sherman
- Reuters, February 15, 2018: “U.S. regulator warns of cryptocurrency 'pump-and-dump' schemes” by Anna Irrera