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Bitcoin: Should you try make money from this hot new currency?

by , 29 November 2013

“What is Bitcoin?” one of my readers asked the other day.

Before I answer that question, let me hit you with another question:

Do you like gambling?

Because if you do, Bitcoin is right up your alley.

Basically, Bitcoin is a virtual currency that can buy a range of things from pizzas to houses…

It sounds great at first. You can buy things anywhere in the world, with lower transaction costs, with a currency that can be easily accessed from your cell phone.

But unless you have nerves of steel and enjoy a gamble… Stay away from Bitcoin!

Here's why…

The explosion of virtual currencies could mean the end of Bitcoin
Bitcoin is probably the most famous virtual currency… But it’s not the only one on the market…
You get Namecoin, Novacoin, Lifecoin, Litecoin and Quarkcoin. In fact, there are currently over 90 different virtual currencies out there!
And these coins are becoming very popular – very fast.
Which could eventually spell the end to Bitcoin, or at least lower its value as the demand for virtual currencies is overwhelmed by a flood of new options.
This is a massive risk if you have money placed in Bitcoin.
So why would anyone put money into these currencies?
There’s a reason why these currencies are a gambler’s paradise…
Look at the value of all these virtual currencies and you’ll see how far they swing. 
For instance, the other day Namecoin shot up 120% in one day. How about Novacoin? It shot up 185%. Quarkcoin? 230%.
But then you get some heavyweight swingers that can shoot up as much as 1,557.8% like Craftcoin… Also in one day.
These kinds of returns sound amazing. Especially if you compare them to the stock market’s average return over the past 20 years of about 15%... per year!
But here’s the thing. These returns can just as easily go against you.
The other day I saw Bitcoin drop from $900 in value to $800. It may not sound like much. I mean that’s just an 11.11% drop. But this drop happened in only four minutes!

The unpredictable nature of virtual currencies like Bitcoin, make them an extremely risky kind of currency. 
What you should do with Bitcoins
If you’re an investor, like myself, virtual currencies are not the answer. Currencies like Bitcoin have no tangible value to them. They also don’t generate interest, dividends or rent income.
You have to rely on others to drive the demand and increase the value of them… And because they’re intangible, no one knows their ‘true value’. In fact, they may not even have a true value!
In the short-term I believe that you can make money from Bitcoins but only by taking on a large amount of risk…
And in the long-term I think there will be more problems for Bitcoin. Governments may try to clamp down on the currency. Regulations could restrict their tradability. But at least there could be more protection for consumers.
Thrive in your possibilities, 
Jonathan Bachrach 

Bitcoin: Should you try make money from this hot new currency?
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