A two-month-old investment trend has turned cryptocurrencies into mainstream and investors have flocked to buy the tokens in order to make money.
As a result, bitcoin – the most popular altcoin to be launched in recent times – has been soaring to record highs of close to $6,500 last week.
Buying cryptocurrencies is becoming increasingly popular as the value of the virtual currencies continues to soar.
So what exactly is crypto?
Cryptocurrencies are digital assets that are created by computers, usually using complicated mathematical formulas, and can be traded via the virtual currency market.
In particular, bitcoin and others, like Ethereum, have become very popular because their supply is limited and their value makes them a good investment
Yet cryptocurrencies are subject to political risks, which have contributed to their rise.
There has been repeated speculation about the demise of bitcoin. Once worth more than $20,000, it is now trading at around $5,000 – some say the decline could be on the horizon.
And cryptocurrencies have also been associated with the practices of online criminals and are known to offer rich rewards for a risk-free delivery of stolen identities and credit card details.
There are other factors to take into account, such as risk-aversion and government regulation, that have fuelled investors’ growing enthusiasm for crypto.
Legal, high-profile ditching of bitcoin in recent months has also gained momentum – notably from former White House adviser Steve Bannon.
‘We don’t want people holding bitcoin just for the heck of it,’ he said last month. ‘I understand why people are doing it. It’s like collecting stamps. Wealth is a virtue in which I don’t put much faith, as I suspect most of the people holding bitcoin do not.’
Other tech titans, such as Facebook chief executive Mark Zuckerberg, have voiced concerns about the risks and benefits of bitcoin.
Facebook has put up warnings to users against making financial transactions via the social media platform, with algorithms flagging up their financial activities, including cash-for-crypto exchanges, the purchase of crypto assets and lending to other people.
The crypto phenomenon has been fuelled in part by China’s banning of transactions using its domestic payment system
A successful bank robbery using a bitcoin wallet last month in Austria underscored the very real risks to the virtual currency as well as being a sign of some flagging optimism over the sector.
The thief used a stolen wallet to transfer 1,620 bitcoins worth more than £5million.
But the crypto phenomenon has been fuelled in part by China’s banning of transactions using its domestic payment system, Tencent’s WeChat, as well as regulatory tension between the US and China – and the Federal Reserve has decided to keep Bitcoin’s regulatory status at the ‘special use’ list, despite fears of panic selling.
A certain degree of speculation has been fuelling further interest in crypto.
Anthony Scaramucci, a New York hedge fund manager who was appointed White House communication director for Donald Trump, has predicted a day when bitcoin can pass $100,000.
Yet many ordinary investors are increasingly becoming aware of the risks and the fact that there are also great potential rewards in these investments.
However, there is no such thing as a guaranteed profit, and many investors should be making sure they have the funds to support a potential investment.
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There is also the challenge of creating a risk-free investment in this context. People need to ask whether they could put their money in a P2P loan or stocks and shares, for example, and if it is better to pass up the chance of making money while they wait to become wealthier by accepting a higher risk – or creating a loss of capital – for the short-term possibility of gaining financial returns.
One of the most common ways to invest in these securities is through crypto-currency – in particular bitcoin and related tokens – although anyone wishing to get started should check the advisers’ regulatory compliance before taking any plunge.
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Experienced Business Developer with a demonstrated history in the insurance software industry. Serial architect of great teams and amazing team dynamics. Generalist with strong skills in: management, business planning, project management, behavioral economics, marketing strategy, training and public speaking. Master focused in Product Life-cycle Management. Digital transformation evangelist.