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Posted: 6:00 a.m. Wednesday, Feb. 12, 2014

Bitcoin is NOT an investment

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By Clark Howard

ClarkHoward.com


Have you heard about Bitcoin? It's an alternative digital currency that represents a reaction to loss of faith in government and fiat currency.

Three years ago, a Bitcoin was worth less than $1. Today it's worth close to $500 to $700 per Bitcoin. But that's down from about $2,000.

I get a ton of calls about using Bitcoin not as a form of payment, but as an investment. Let me be perfectly clear: Bitcoin is NOT an investment!

There may be a role for Bitcoin in worldwide financial circles, but it's still too speculative for me to recommend it.

For example, Bitcoin exchange Mt. Gotz recent shut down the ability of people to get Bitcoins. They said there was problem with the code that would let hackers create counterfeits Bitcoins. After the shutdown, the value instantly fell by 20%.

A movement of a fraction of a percent in traditional currency trading is a huge amount. So you can imagine the kind of volatility a 20% drop brings!

Don't count out alternative currencies altogether though. The most successful non-governmental form of money is in Africa where people use cell phone minutes. When you go to a store to buy something, you text the store owner minutes for a can of soda or whatever!

So alternative world currencies are not unprecedented. But I have to urge real caution on people who get into Bitcoin as the latest and greatest craze.

Again, know Bitcoin is NOT investment. To use it that way is treating it like Vegas; you can make money or lose big money in the blink of an eye.

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