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Why I'm scared of 'Ghost' currencies!

by Timon Rossolimos

In the 16th-8th century BC, people used sea shells as a currency. Even stranger, a craze for tulips in the 16th century, lead to tulips becoming a currency…

Both these situations saw an essentially worthless item being 'assigned' value by society. For some time this value held, but eventually people realised the value they thought was in the item wasn't, they realised they were holding a 'ghost' currency...
And when that happened, there was an enormous crash in the markets for these currencies and people holding them lost vast amounts of their wealth…
In the last few weeks I've been reading about another 'ghost' currency rearing its head…
It's called the Bitcoin. Most people have heard of it at one stage or another. 
And many people are putting their money into it. But very few people actually understand it…
Why I believe the Bitcoin could be just another 'ghost currency'
A Bitcoin is a digital currency that circulates between buyers and sellers and is not regulated by a bank or the government. In other words it's a peer-to-peer currency system using a programming code.
Essentially, I believe it could actually be just another 'ghost currency like sea shells and tulips…
Now, I'm sure by now you're uncertain where I'm going with this.
Well, today I'm going to explain exactly how these ghost currencies works and why you should avoid putting any money in them for now.
In fact, avoiding them could save you thousands of rands…
It's the year 2013 and we remain in an information age filled with a pot-pourri of digital innovations
For the past five years, Bitcoins have been in circulation.
This currency exists electronically but its value is based on one thing only. 
Its Perception...
The Bitcoin was worth nothing to begin with until people started buying and valuing it. 
They then literally started developing confidence in the value of this virtual currency relative to formal currencies.  So from something that had zero value, people started valuing Bitcoins by believing they have value. 
But you need to make sure you don't get sucked in by the perception of value…
5 reasons why I am a sceptic with these 'ghost' currencies! 
Reason #1: First of all, no one really knows who on Earth created the Bitcoin. I mean there are rumours that a man named Satoshi Nakamoto designed it in 2008. But then he disappeared and told everyone he's moved into other ventures. Already I think this is suspicious... 
Reason #2: Bitcoins have a very limited supply and that makes them very volatile in value. It's another literally 'Get Rich Quick' but also a 'Get Poorer Quicker' scheme. A Bitcoin has the ability to drop 50% to 99% in a single day. In fact, this happened in 2011 where the Bitcoin plunged from $17 to about one cent! This is far too risky for my liking. 
Reason #3: Bitcoins are sold from computer to computer network, so this means it's not regulated at all. Not by a bank or by the government. Don't you think this is frightening? You're essentially trusting your money with no regulations in play. Come on! This is like an open invitation for fraudsters to get involved.
Reason #4:  Being purely digital, you never know if the application controlling the system will get corrupted by a virus. Your Bitcoins will start getting 'lost'. Let's not even get into the risk of others hacking into your account and stealing your virtual currency! And there's absolutely nothing you can do to recover them. When there's money, you know there are illegal schemes in the making. 
Reason #5: This system is designed to reward early adopters. Those who originally created the Bitcoins are the ones who are profiting as people attribute a value to this fictitious currency. 
With all these reasons against Bitcoins and knowing they're currently at $117 dollars; I'd give it a skip. 
Now if you've decided to go have fun with this risky currency, then invest only what you are prepared to lose. After all, anything can happen with these 'spooky' instruments. 
But if you want to start making real money, rather trade real currencies which are traded through a regulated foreign exchange (Forex) environment.
To learn more about trading Forex, click here.
Keep in mind 'Wisdom Yields Wealth"

Timon Rossolimos 

Editor, Trading TipsSaveSave


Copyright 2016, Fleet Street Publications (Pty) Ltd. The information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. No action or inaction should be taken based solely on the contents of this publication. We do research all our recommendations and articles thoroughly, but we disclaim all liability for any inaccuracies or omissions found in this publication. The past is not a guide to future performance. Trading derivatives on margin carries a high level of risk, and may not be suitable for everyone. Before deciding to trade any type of derivative instrument you should carefully consider your investment objectives, level of experience, and risk appetite. Remember, you could sustain a loss of some or all of your initial investment, which means that you should not invest money that you cannot afford to lose. If you have any doubts, it is advisable to seek advice from an independent financial advisor.

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