Adverts for investing in cryptocurrency are EVERYWHERE – I can’t count the number I have seen at bus stops, in tube stations, and plastered all over the internet. I have plenty of friends who are interested in it, and some who have even invested in it. Cryptocurrency has really taken off over the last few years. But what is it, and what should you consider if you want to invest in it?
Cryptocurrency is a digital currency, such as Bitcoin and Ethereum, which are traded as an asset – like trading gold or trading stocks. However, because cryptocurrency is not linked to anything physical, the price is completely determined by the mood and trends of other people who are trading it. This makes it an extremely volatile and high risk investment. In the past, the values of cryptocurrency have gone up and down wildly! The value of Bitcoin has historically gone up as much as 65% in one day, and often falls just as dramatically.
Are all cryptocurrencies legitimate? Definitely not! There are plenty of scam cryptocurrencies out there, and sometimes these scams are backed by well-known celebrities (or appear to be backed by them!). It is so important to do your research to find out if a particular cryptocurrency is legitimate. If it does turn out to be a scam, your money is not protected by the FSCS (like some other investment types are) so you could lose it all.
There’s also an environmental aspect to trading cryptocurrency. It has a huge carbon footprint because of the way it is ‘mined’ using massive computers. According to Forex, Bitcoin alone is thought to emit 57 million tonnes of CO2 each year – and you would need to plant 284 million trees a year to offset it! That’s potentially a huge contribution to climate change, and another important consideration if you are looking to invest in it.
If this blog post has piqued your interest to find out more about cryptocurrency, here are some resources you can try:
A guide produced by the Bank of England
The Times article “Cryptocurrency trading for beginners”
Money Saving Expert article “Should you buy Bitcoin?”
Sarah Chitson
King’s Student Money Mentor
Part of Money & Housing Advice
The King’s Student Money Mentors blog shares our students’ personal experiences and thoughts on money-related topics. Any reference, opinions or recommendations on a particular company/brand are only the views of the student(s) who wrote the blog post. King’s College London, the Money & Housing Advice service and the Money Mentor project do not share the views in the blogs nor endorse any of the companies mentioned. Readers should conduct their own research before using any companies mentioned in our blog posts.