What is Bitcoin? Am I missing out?

This is a Personal Finance Friday question from several of our Financial Planning clients.
 
So what is Bitcoin? And are you missing out if you don’t invest in it now?**
 
A currency has two key aspects:

1. Store of value. Does it hold value for the future?
2. Method of exchange. Can it be traded for goods and services?

 
Main points to know:

• Most cryptocurrencies do not meet these requirements.
• Does Bitcoin? Yes, no, and maybe.
  • You can use it as a value store, but it is highly volatile. If your country’s currency experiences high inflation or high volatility, Bitcoin may be better for you. However, if your currency is more stable, like Euro and Dollar, it is less reliable.
  • As a method of exchange, it technically can be used for this, but it is quite difficult and can be slow. As a day to day method of exchange it has room to go.
• Massive volatility. This is not money in the bank. It is more of an emotional and financial rollercoaster.
• If you are comfortable speculating – go ahead.
• There is no consumer protection. Unlike the normal banking system, if you get scammed, you are probably not getting your money back. (yet, some people in the space are pushing for regulation)
• Is it money you can lose? If you are investing money you cannot afford to lose, this is probably the wrong asset type for you.
• Be aware of the tax situation.
• Check out our “should I be investing video”. Do you meet the basic requirements set? Do you have savings, is your high interest debt paid, can you afford to lose the money, does the investment type meet your risk comfort?
• Know the risks. It can be okay to invest in Bitcoin and cryptocurrencies, but you could lose it all. Make sure you don’t over invest in this asset class. Diversify!

 
 
*This is an early video for us. Our video skills and equipment improve with time, please be forgiving. We offer financial planning and education, the media stuff is a work in progress.
**This video was released in early January 2018. This stuff is moving quickly.
 
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