Posted: 3/14/2018

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Cryptocurrencies, such as Bitcoin and Ripple, are gaining more and more popularity. The virtual currency is used worldwide to make online purchases. If you are active on social media, you have no doubt seen invitations to invest in the new currency. The promise of great financial gain for investing dollars into digital coins can be enticing, but there are risks as with any investment.

cryptocurrency

Cryptocurrencies, such as Bitcoin and Ripple, are gaining more and more popularity. The virtual currency is used worldwide to make online purchases. If you are active on social media, you have no doubt seen invitations to invest in the new currency. The promise of great financial gain for investing dollars into digital coins can be enticing, but there are risks as with any investment. Be cautious if any promoter guarantees returns. And as with any situation, if it seems too good to be true or if the salesperson pressures you to act before you have had the chance to look into the offer thoroughly, it is best to proceed with caution. These are clear signs that the offer may be a scheme.

Because cryptocurrencies are not backed by a central bank or the government, its value is entirely dependent on what investors are willing to pay for it at a point in time. This makes them vulnerable to huge price swings. The quick plunges that the investment may take may be reason enough to look into other investments.

No matter what a promoter may tell you, there are no guarantees when it comes to investments. The risk of losing most, if not all, of your investment is always present. Celebrity endorsements, social media buzz, or offerings made by well-known companies are no assurance that you will make money from the investment.

With all of this in mind, what should you look into when deciding which virtual currency investment to choose? Here are a few things to ponder:

  • Registration requirements. Does the offer involve offering or selling securities? If so, these probably need to be registered with the Securities and Exchange Commission or be rendered exempt from such registration. Ask the promoter about this. If they claim that it is registered, verify that it is by contacting the SEC. If they claim it is exempt, you may want to use caution because most exemptions come with net worth or income requirements.
  • How the investment will be used. Asking how your money will be used is very important. A clear business plan should be provided to you. You should know how and when you can get your money back if you choose to do so.
  • Security risks. Entities that hold virtual currency may be vulnerable to fraud and hacking. Unlike U.S. bank deposits, your funds are not insured. Look into who will be responsible if something goes wrong, such as a security breach, malware mishap, or fraud.
  • Tracking your investment. Along with how your money will be used, it is equally important to know the status of the investment. Will you receive statements and, if so, who is auditing them for accuracy?
  • Legal rights. Ask about your legal rights with the investment and if there will be adequate funds to issue compensation in the event that your rights are violated.

The possibility of making a financial gain through investing in this growing market may be enough to convince you to make an investment. It is vital to learn as much as possible about the investment, such as risks and possible results of investing before diving in. Always check out the companies involved with the offer first by getting a reputation report from BCA. In addition to asking questions of the promoters, get information from previous investors and seek the advice of a reputable advisor before making an investment.

For more information on investment offers, securities, and other business opportunities, check out BCA’s Resource Guides, blogs, and agencies such as the SEC.

About Business Consumer Alliance

Business Consumer Alliance (BCA) is a non-profit company that started in 1928. The broad purpose of BCA is to promote business self-regulation. BCA's mission is achieved by assisting consumers in resolving complaints with businesses and using that complaint information, along with other relevant information such as customer reviews, to forecast business reliability. With community support, BCA can identify trustworthy and ethical businesses and warn the public to avoid unscrupulous businesses whose purpose is to defraud the marketplace. BCA also helps businesses promote themselves by providing services and tools to protect their business and reach out to their customers. BCA obtains its funding from member businesses who support the mission and purpose of the organization and who agree to abide by high standards of ethical business practices.

Tags: investment, bitcoins, virtual currency

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