Ledbetter agrees: "Those publicly known investments of big companies exist in the real world," he says. However, bitcoin bulls say the 2017 rally was different because it was driven by speculation from retail investors, whereas the current rally is driven by institutional investors buying the coin. Rosenberg considers bitcoin "the biggest market bubble right now," CNBC reported. "The parabolic move in bitcoin in such a short time period, I would say for any security, is highly abnormal," David Rosenberg, chief economist at Rosenberg Research, told CNBC's " Trading Nation" in December. Those weary of bitcoin are concerned that the cryptocurrency's current rally is reminiscent of the 2017 bubble. Can bitcoin be easily converted to fiat and transferred?
"It's not like there's something intrinsically unsafe about bitcoin itself– it's more how people are handling or managing it," Ledbetter says. The safest bet is to use a trusted brokerage, experts say – "these established places have a good security protocol and a quick application to protect," Ledbetter says.Īll in all, "things happen," he says, "but when you look at the big stories of theft, they tend to be institutional and kind of on the fringes."Īccording to the Federal Trade Commission (FTC) website, cryptocurrency scams are "a popular way for scammers to trick people into sending money," and most scams can "appear as emails trying to blackmail someone, online chain referral schemes, or bogus investment and business opportunities." "There's always some potential for fraud or security risk." Ledbetter also points out that a traditional stock account with a brokerage could be compromised too. "To hack it, you would have to take over the network, and to take over the network, you would need your own network of computers running 24/7, and to do that, it would cost billions of dollars," according to Paul Vigna, markets reporter at The Wall Street Journal. Plus, bitcoin is extremely hard to hack thanks to blockchain. "I always remind people that bitcoin literally has a public ledger," Pompliano says. Through this, a scammer could potentially be traced after the fact.
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Each bitcoin transaction is documented on a digital ledger called the blockchain, where a user's cryptocurrency "wallet" is represented as a unique series of random numbers and letters. While bitcoin allows for users to transact without revealing personal information or identity (potentially making fraud easier), it's not totally anonymous. I think those are legitimate fears," Ledbetter says. "There have been multiple examples of bitcoin theft and fraud that I think would give pause to the average investor, particularly if you were going to invest a substantial amount. As a result, hundreds of thousands of dollars in bitcoin had been transferred under false pretenses.įor many, this prompted questions around the safety of bitcoin. In July, a widespread Twitter hack compromised many celebrity accounts – including that of President-elect Joe Biden, former President Barack Obama and Tesla CEO Elon Musk, to name a few – in a bitcoin scam. By design, there is a limited supply of bitcoin, so bitcoin bull Pompliano believes as demand increases, the price will as well.)
(If you do decide to invest, Pompliano supports holding bitcoin long-term. "Just start very small, do research, learn about it," Pompliano says. Of course, despite its high selling price, "you can go and buy as little as even $5 of bitcoin because there is the ability to buy fractional shares called satoshis," points out Anthony Pompliano, co-founder of cryptocurrency hedge fund Morgan Creek Digital Assets and a bitcoin investor. It could happen tomorrow," Ledbetter says. "You have to at least be mentally prepared and financially prepared that could happen again. That's why some, like investor Mark Cuban, liken bitcoin to gambling and advise investing only as much money as you can afford to lose. While that can mean big returns, it can also mean big losses. (For example, after rallying to nearly $20,000 in 2017, bitcoin's price collapsed and lost a third of its value in a single day, and in 2018, it dropped to as low as $3,122, wiping out billions of dollars from the total cryptocurrency market value.)