BITCOIN WARNING: City of London ‘must realise cryptocurrency is HIGHLY VOLATILE’

Tuesday, December 19, 2017
By Paul Martin

BITCOIN is ‘highly volatile’ and the City of London must realise the risks of investing in cryptocurrencies, an economist has warned.

Tue, Dec 19, 2017

As City of London firms begin considering Bitcoin as a genuine investment opportunity concerns are being raised over the danger of lumping Bitcoin and Ethereum together in one basket.

With users in their thousands signing-up to the various platforms like Coinbase over the last month there is a danger that, during the frenzy, investors are seeing cryptocurrencies like Bitcoin, Ethereum, and Litecoin as one and the same thing – a chance to make quick and easy money.

As industry commentators look for the pin that will burst the Bitcoin bubble, warnings are beginning to sound over the huge misunderstanding among both people trading cryptocurrencies at home, and the newly-arrived industry investors over how the various Bitcoin-like products work.

The danger in believing that the newest coin is merely the next big opportunity for profit misses the point that the nuances between the different cryptocurrencies could be the source of their value over the long-term.

Daniele Bianchi, Assistant Professor of Finance at Warwick Business School, told that failing to understand the differences between the various cryptocurrencies could be very costly for City investors.

Mr Bianchi said: “Bitcoin is a young and highly volatile speculative asset. Investing in Bitcoin is risky, everybody should realise that, the City of London included”.

The economist adds with over a thousand cryptocurrencies actively quoted on several exchanges – Bitcoin Cash, Ethereum, Litecoin, and Ripple – it is very important to understand that offerings like Ethereum and Litecoin are based on very different protocols to those based on Bitcoin.

Mr Bianchi said: “To make informed investment decisions one needs to understand the potential of every cryptocurrency and the underlying potential diffusion. To some extent this is what happens with the tokens; investors primarily value the projects and ideas.

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