Have you invested in cryptocurrency? Or perhaps you missed out on buying Bitcoin when they were cheap, and you're now considering an alternative option?
Let’s take a look at the current digital currency climate and any scams you should keep a lookout for.
What is cryptocurrency?
If you haven’t jumped on the Bitcoin bandwagon and aren’t really sure what it is, we have a bit of a run down for you.
Digital currency is digital cash and comes in a variety of forms including Bitcoin, Ethereum and Litecoin. They are all created and held online. You can’t withdraw any of them from a bank or ATM as coins or cash, with the currency held in a digital wallet.
They can, however, still be used to buy goods and services, like Australian dollars, but only with merchants that accept it. Cryptocurrencies use cryptography instead. This involves generating codes (aka a blockchain) to offer secure online transactions instead of a regular bank authorising the transaction. The high level of security provided by the blockchain is part of the appeal.
Are cryptocurrencies legal in Australia?
The legality surrounding cryptocurrency is dependent on each country. In Australia, cryptocurrencies and exchanges are legal. In New Zealand, the tax office has just given the green light for people to be paid in cryptocurrency rather than NZ Dollars if they choose to do so. However, in China and several other countries, they are banned.
Are cryptocurrencies worth investing in?
The economic value of cryptocurrency, like most goods and services, comes from supply and demand. Supply refers to how much is available and demand refers to people’s desire to own it. The reason Bitcoin blew up is that there are only 21 million of them in the world. These are ‘mined’ using special computer software, and once the miners have unlocked them all, that’s it! So, many people believe they’re going to increase in value and are worth the investment.
While we’ve definitely seen the value of Bitcoins grow over the past few years, many digital currency experts state cryptocurrencies are a high-risk investment due to the market value fluctuation. For example, Bitcoin was worth $20,000 in December 2017, and dropped to around $3200 a year later, but then grew to $8000 in May 2019.
Will cryptocurrencies survive?
You’ve likely heard about the first cryptocurrency, Bitcoin, but there are more than two thousand digital currencies traded publicly at the time of writing. There is no definitive answer as to whether they will all survive in the future, and given their fluctuating nature, the risk is very high. Many experts believe the major digital currencies like Bitcoin and Ethereum will, but again it’s all speculation.
When the internet is involved, you can be sure there’s a scam looming around nearby. Given the digital nature of cryptocurrencies, many people have unfortunately been scammed out of large sums of money.
Cryptocurrency scams come in all forms, but their ultimate end game is to steal your money. There is always a way to ensure you are purchasing digital currency via a legitimate exchange by keeping an eye out for:
- Unregulated cryptocurrency exchanges – be wary of 'too good to be true' promotions, these are particularly rife on Facebook at the moment and reference people like Mel Gibson and Atlassian’s Mike Cannon-Brookes as case studies.
- Fake websites - keep an eye out for the small padlock in the URL bar to ensure the site is secure.
- Tampered URLs – some scammers replace an o with 0 and direct you to a site where you end up paying them. To avoid redirection, type out the URL yourself.
- Scam emails – verify the email address attached to the name and double-check it’s attached to the company they claim they’re working for. These emails often offer alternative coin offerings to steal your money.
Is Cryptocurrency the way of the future?
Some people say that digital currency has the potential to make the world better. This is by removing governments, banks and other financial institutions and simply allowing two people to exchange money directly without exorbitant fees and taxes. Experts do agree that cryptocurrency can address the shortcomings of our financial institutions and help prevent identity theft as well as contribute to economic equality. Will cryptocurrency be the way of the future? – only time will tell.
Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering.