Booming cryptocurrency Bitcoin set a new record this week when it hit a price of more than $61,000 (£43,000) on Sunday.
As its value soars, many consumers will be thinking about investing in the cryptocurrency. But financial watchdogs and even some tech billionaires have warned investing in the unregulated digital coin is risky.
Consumer finance expert Martin Lewis recently explained some of the risks to viewers of The Martin Lewis Money Show on ITV. He said the cryptocurrency is extremely volatile, so warned consumers not to invest money they couldn’t afford to lose.
Back in 2017, the price of Bitcoin soared from around $1,000 (£720) in March to roughly $20,000 (£14,360) in December, according to Investopedia. But the bubble soon burst, and its value had fallen to around $4,000 (£2,870) by the beginning of 2019.
Lewis told viewers in January: ‘The thing about investing—and Bitcoin is an investment—is that prices go up and prices go down. With Bitcoin, they go up massively and they go down massively. And the reason for stressing that so much is that you can make a fortune, but you may lose a fortune.
‘So if you can’t afford to lose the money that you put in, then do not invest in it. It’s a gamble, like all forms of stocks and shares, and all forms of investment and putting money in gold.
‘That’s your choice, but if you do it the right way the investment should work for you, but it doesn’t mean you won’t lose money though.’
He also cautioned that, like any traditional asset, Bitcoin can be stolen.
But consumers are unlikely to be able to use consumer protective services like the Financial Ombudsman Service or the Financial Services Compensation Scheme for cryptocurrencies.
Lewis added that some scammers had fraudulently used his image to promote Bitcoin trading services on Facebook.
He warned consumers planning to invest in the cryptocurrency to ‘be incredibly careful to do your research and go for a legitimate source.’
What is Bitcoin?
Bitcoin is a type of cryptocurrency, which is a virtual or digital currency – like an online version of cash.
It works without a central bank and is usually exchanged from person-to-person when it is sold or exchanged, without anyone working in-between to overlook the transaction.
Some people like the fact that Bitcoin is not controlled by the government or banks.
It was first released in 2009 and its value has fluctuated over the last 12 years.
People can track their ownership of Bitcoin by using a cryptocurrency wallet, which is a digital way to exchange payments.
It is easy to track as details are stored in a ledger called blockchain, which is publicly accessible and it includes all confirmed transactions.
The value of the cryptocurrency fluctuates all the time in a similar way to more conventional currencies.
MORE : Bitcoin passes $50,000 as price continues to rise
MORE : Bitcoin surges as Tesla buys $1.5 billion worth of the cryptocurrency