Sunday, February 23, 2020

Cryptocurrencies – Scams Or Opportunities For Investors?

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Bitcoin has broken new ground with the price heading to new record highs this week – but should you invest in cryptocurrencies?

Bitcoin may be the most well-known, but more than a thousand cryptocurrencies are living on the internet.

Few are worth more than a few dollars, with Ethereum and Ripple the other major players, but a long way behind Bitcoin in market capitalisation and value.

While Bitcoin is trading around the $8,330 mark and basking in more than a 710% increase in value since the start of the year, Ethereum has peaked at $413 this week and Ripple has posted a record price of 23 cents.

But as the price soars, some experts are backing sensible investments in Ethereum and Ripple until Bitcoin crashes again – then buy and hold.

Bitcoin has a track record of values dropping like a stone and then recovering, so the next correction is expected sometime soon.

Cryptocurrency risks

Earlier in November, Bitcoin plunged from $7,458 to $5,857 in three days, only to fly back to more than $8,200.

Someone buying a Bitcoin on November 12 could sell today for a $2,381 profit.

Don’t forget investing in Bitcoin or any other cryptocurrency comes with risk.

In most countries, investors are protected by a financial compensation scheme that covers at least some of their loss if the deal goes wrong.

With Bitcoin and cryptocurrency, investors are on their own.

No government or central bank polices conduct in the market, which has left the door open for fraudsters.

Getting your money back from an electronic wallet may not be as easy as buying cryptocurrency.

Government warnings

Exchanges are notoriously slow at paying refunds, while hackers and other crooks abound.

In China, America and the UK, government regulators have stepped in to tighten up rules on cryptocurrency investments.

Some of the more risk intensive investments are already banned in China, such as initial coin offerings, while the US and UK have warned investors to stay away from ICOs and betting on CFDs (Contracts for a difference).

ICOs are the cryptocurrency version of crowdfunding, where companies invite investors to fund projects in return for coin tokens and other rewards. Many have collapsed with the promoters disappearing with the cash.

CFDs are bets on if the value of a cryptocurrency will rise or fall within a set period.

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