At Liberty, we often receive questions from our clients about alternative investments such as cryptocurrencies, specifically bitcoin. Here’s what you need to know.
It’s important to mention that the Liberty Group is not licensed to sell any cryptocurrency, and our financial advisers are not allowed – or licensed – to give any advice on buying them. We would, however, like to take this opportunity to warn our clients about the risks of cryptocurrency investing.
Bitcoin – or any cryptocurrency – is not an investment in the true sense. There's no way of valuing it or providing any real analysis of its worth. Currently, the only reason people are buying bitcoin is in the hope that the price will rise. They have no real understanding of what that price should be or why it should rise. This is what we call speculation.
Defining speculation
A speculative investment is defined as one with a high degree of risk, where the focus is on price fluctuations rather than the income or underlying assets. There is usually a significant risk of losing most or all of your money, with the expectation of a substantial gain. This is more closely related to gambling at a casino than investing.
Any decision to buy cryptocurrencies should be seen in the same light as betting at a blackjack table and should certainly not be seen as a way to get rich quickly or solve your financial problems.
Also, be very careful, because many investment scams have emerged as a result of the hype around cryptocurrencies. “Investment experts” make promises, claiming that they can make you money from cryptocurrencies, but many are fronts for Ponzi-type scams.
As you continue on your investment journey, always consider the impact speculation can have on your ability to accumulate long-term wealth.
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