BUFFALO, N.Y. (WIVB) — Cryptocurrency is a form of investment that has made many people very rich in a very short period of time.
What is most puzzling about cryptocurrency — it is currency. The U.S. dollar, that is currency, the ruble, Japanese yen, that is currency. Do you know of anyone who has bought $100,000 cash and made a fortune from it? That is almost exactly what investors are doing with Bitcoin.
The most well-known cryptocurrency right now is Bitcoin — it has grown exponentially in value over the last few years, turning small time investors into millionaires almost overnight. But Paul Coleman of Level Financial Advisors says, keep in mind, it is currency — digital money you are supposed to be other things of value with.
“I mean, the vast majority of people that you are talking to do view the various cryptocurrencies as an investment, instead of more of an actual currency that can be used to buy and sell things,” he said. “As the demand for the various cryptocurrencies increases the price of them goes up.”
Coleman told us, the attraction of cryptocurrency for investors is it eliminates the middle man — governments that issue and control the value of their currencies. Value for Bitcoin and other digital currencies, theoretically, is how much millions of investors are willing to pay for it.
Cryptocurrency is supposed to be more stable, but lately that is changing.
“What is important to note is that so far it has fallen faster and more significantly than your traditional stock markets like the S&P 500, the NASDAQ or the Dow,” Coleman said.
He also pointed out cryptocurrency is in many ways like cash — if you lost track of it, you might as well burn it.
“I believe the famous example is a gentleman who lost his bitcoin wallet in a landfill, accidentally threw it out, and offered to pay the city that owned the landfill tens of millions of dollars to sort through the landfill.”
Coleman told us the man had bought his cryptocurrency when the value was very low, discarded his password to his bitcoin wallet, and when he realized his mistake, the value had ballooned to $100 million. Coleman also advised — stick to investments you know.