A Massachusetts’ top security regulator, William Galvin has warned about the dangers of Bitcoin. The security of the Commonwealth issued a statement just this week, where he likened the cryptocurrency craze to the tulip mania of the 17th century, warning investors that it could all end in disaster.
So, before you choose to invest in the popular cryptocurrency, glance your eye over Galvin’s statement, which advises and actively encourages investors and any potential investors to consider the following seven points before they purchase any of the cryptocurrency that has dominated much of the headlines over the past two weeks.
- Virtual currencies, which includes Bitcoin are not regular money. This is because they are not backed by the United States, or any other government or central bank.
- You should carefully investigate the seller, before you make any purchase of Bitcoin. You should have a plan in case should something go wrong. Ensure that you have compared all of the fees and costs associated with your Bitcoin purchase and make sure you know what the terms are for redeeming your Bitcoin into regular money.
- Remember that virtual wallets that are used to store Bitcoin do not provide the same safeguards as a deposit make in a traditional banking institution. If your Bitcoin is stolen from your virtual wallet, you may not be able to recover your funds.
- The value of Bitcoin fluctuates enormously, and has been known to do this in a very short time period. This will mean that you see radical changes to your Bitcoin investment, and you might be able to see single day drops or increases in the thousands of dollars.
- There is a lot of speculation surrounding Bitcoin investments. This is mainly because the value is not related to economic or financial parameters. Just like you would with any form of investment, never ever speculate with money that you cannot afford to lose.
- Virtual currencies, including Bitcoin are all based on a public ledger called the ‘blockchain’. This is still in the experimental stages, and is often subject to changes and errors, as well as criminal activity, which could have an adverse effect on your virtual wallet, or in the worst case scenario, completely erase your Bitcoin value.
- Finally, Bitcoin is ambiguous and unrelated, which leaves it very open to investment scams, and financial fraud, which can all result in investors losing their money.
Image Source: Flickr