Thinking of finally investing in bitcoin? You really need to read this

If you think bitcoin or other cryptocurrencies will provide you with a route to quick riches, you could be in danger of falling victim to ramping.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

WhilebBitcoin and other cryptocurrencies might not be hitting the major headlines very much these days, I have been noticing insidious new developments of late.

What happens is a new cryptocurrency comes along, with the frequency of Initial Coin Offerings rising alarmingly. In fact, there are an estimated 1,500 individual cryptocurrencies in operation these days, traded on nearly 200 exchanges around the world.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Ramping

And they’re being ramped all over the place. Reddit seems to be a popular place with its /r/CryptoCurrency/ forum, but they’re turning up everywhere. Just following a couple of links, I find technical analysis gibberish from short-term cryptocurrency traders, to ludicrous claims of why cryptocurrencies are better than trusting the corrupt conspiracy that is the banking system, and so on.

It’s become so bad that even Wikipedia has introduced emergency measures to try to curb the spread of cryptocurrency ramping. What happens is that a new currency, let’s call it DoshCoin, is launched. The next thing you know, you get a new account called something like DoshCoinTruth which is then used to write glowing praise about it.

It’s reminiscent of the bad old days of the early internet, when investing forums were just getting started and were easily abused by unscrupulous rampers trying to push dodgy penny shares. Thankfully, these days, most investing communities tend to have trustworthy regulars who can spot a ramp a mile away, and things are a lot better. But blockchain ramping is reaching new victims via new routes.

Countries too?

In a scary move, the Republic of the Marshall Islands is apparently considering adopting a digital currency as legal tender. That seems especially dangerous as the country has only one domestic commercial bank, and its only current legal tender is the US dollar. The IMF has, unsurprisingly, cautioned against the move.

Cryptocurrencies continue to fluctuate wildly in value, which actually makes them unsuitable for use as currencies. What a currency needs is stability, which is why the US dollar is so widely valued around the world while the Venezuelan Bolívar isn’t.

And it’s that total unpredictability of future valuation that makes them unsuitable as a long-term investment vehicle too. Consider it akin to a gambling chip at the poker table if you like, but I reckon you’d be mad to trust anything as important as, say, your pension or your children’s legacy to the cryptocurrency markets.

Horrible volatility

Even the most famous of them all, bitcoin itself, remains highly volatile. Reaching a peak above $19,000 in December 2017, the price has crashed as low as around $6,300 now. And looking at the recent short term, bitcoin fell by 16% in just four days at the beginning of September — and the currency markets go nuts when the pound moves by just a cent or two against the dollar.

There are already moves towards more stable electronic currencies, for example tied to and backed by traditional fiat currencies. But they won’t be much use for long-term investors.

And right now, if you’re thinking of taking advantage of fallen cryptocurrency valuations as an investment, I’d urge you to think again. After all, a share of a productive and profitable company will generate actual new wealth. Bitcoin never will.

More on Investing Articles

Happy young female stock-picker in a cafe
Investing Articles

I’d drip-feed £300 a month into my Stocks and Shares ISA to aim for million

Investing regularly via a Stocks and Shares ISA is a simple way of possibly reaching a million-pound portfolio. Zaven Boyrazian…

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing Articles

Is this penny stock on track for an explosive recovery in 2022?

Investing in penny stocks is a risky endeavour. But it can also deliver gigantic returns for a prudent investor like…

Read more »

Close-up of British bank notes
Investing Articles

Secrets of the world’s most successful passive income investors

Here's how it's possible to secure a healthy long-term passive income stream, based on a few simple principles gathered from…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

Down 50%, will the Royal Mail share price bounce back?

The Royal Mail share price has halved in value in the last year. After such a decline, is it now…

Read more »

Partnership of business concept.
Investing Articles

Director dealings: Marks and Spencer, Cranswick, Homeserve

Director dealings can indicate whether a company's doing well. So, here are this week's biggest insider transactions at three FTSE…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

Best British growth shares for July

We asked our freelance writers to share the top growth shares they’d buy in July, which included data firms and…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

2 FTSE 100 shares to own heading into a recession

Inflation is surging and many global economies are slowing down. Our writer considers the best FTSE 100 shares to own…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

UK shares: 1 cheap dividend stock I bought to combat inflation!

This Fool is on the lookout for the best UK shares to protect himself from soaring inflation. Here is one…

Read more »