Since its appearance in 2009, Bitcoin has gone from a novelty collected by tech-lovers and people looking for alternatives to mainstream investments to a multi-million-dollar phenomenon attracting the mainstream channels it was seemingly intended to overthrow.  But is Bitcoin that financial savior and lucrative investment it is touted to be?

“When I say ‘boom’ here, it is just as likely, if not more so, that this will be a catastrophic explosion as it is an exponential increase in value and success,” says Richard Cayne of Meyer International and Asia Wealth Group. “I fear that this growth is mainly fueled by FOMO than by sound fundamentals.”

Bitcoin is not a true currency

This is something that could be debated for a long time. Bitcoin was created as a form of exchange, so it technically could be considered a currency. However, even with all the publicity and ink given to its popularity and its worth, you can’t exactly go buy a gallon of milk with Bitcoin at your local grocery. More likely, you will have to convert (sell) your bitcoin to dollars or your local currency to effectively use its value.

More importantly, Bitcoin does not have an intrinsic, or underlying, value. Commodities like gold, oil, and orange juice have a value based on its use. Fiat currencies such as the US dollar or Japanese yen are tied to an economy and are regulated. Bitcoins and other cryptocurrencies only have value based on their demand. And that’s usually expressed in US dollars.

So what? I can make so much money

That is true. And if you did invest in Bitcoin before this amazing value increase, you’re probably laughing at this article right now. Are you willing to bet your future on that? Of course, if you are willing to ride the volatility, then Godspeed. And there is volatility. In the last week of February 2021, Bitcoin went from a high just above USD 56,000 to about USD 45,000. That’s almost 20%.

Now you could say that USD 45,000 is still a lot of money. If you bought the cryptocurrency when it was at USD 5,000 or even USD 10,000 that an amazing profit margin. But when demand is the only thing controlling the value, you need to be extraordinarily vigilant of the markets. Remember what we mentioned above about people still needing to sell BTC for USD to make purchases?

And then there are the cryptocurrency scams

If you are still interested in buying Bitcoin, you can’t exactly walk down to your local bank and make a purchase. So, in this vacuum, there appears scammers who have gotten very good as appearing legitimate. In some cases, these may be hackers who outright steal Bitcoin from custodians and exchanges to email scammers that take advantage of the inexperienced by hi-jacking their wallets (if you don’t know the difference between cold and hot storage, you may want to wait before you invest).

What is an investor to do? Well, first, they should research their options to the best of their ability. And, as always, talk to a trusted financial expert like Richard, who can explain the issues with any Bitcoin or cryptocurrency investment, so that you are as informed as possible before making any final decisions.