Although many people have heard of Bitcoin, few know what it is. Bitcoin is a form of digital currency that is also referred to as cryptocurrency. It works on a decentralized peer-to-peer (P2P) networked program that is installed on your computer, which means that financial transactions can be carried out between a seller and buyer without there being a need for third party intervention such as from a bank or other financial institution. The technology that makes it possible to use Bitcoin or any other forms of cryptocurrency is known as the blockchain.
The Bitcoin Rollercoaster
Over the past few months, the value of Bitcoin has fluctuated rather substantially. During mid-December in 2017, it skyrocketed to around the $20,000 mark, only to lose approximately 40% of its value within a week or so. However, it then managed to bounce back and since then, its value has not stopped fluctuating.
Potential Risks Associated with Bitcoin
Unfortunately, this cryptocurrency has all of the traits associated with what is referred to as a ‘speculative bubble,’ meaning that history is strewn with several examples of speculative rushes that have eventually collapsed. Another potential risk is regulation. Some cryptocurrencies have become the preferred medium of exchange for many criminal organisations because of their complete anonymity, which has resulted in many governments around the world wanting to crack down on them at some point in the near future.
As with any other type of investment, it is strongly recommended that you perform in-depth research before making a final decision. If you are unsure whether a particular form of investment is appropriate or not, it is best to speak with an experienced financial advisor.