More and more consumers are interested in investing in virtual currencies, partly because of the spectacular returns. Virtual currency (also called cryptocurrency) can be described as a means of payment that is not checked and has not been issued or guaranteed by a central bank. Bitcoin and Ethereum are well-known examples, but there are also hundreds of different virtual currencies.

A financial bubble?

Due to the recent increase in popularity and the explosive price increases, these currencies show similarities with a financial bubble. With a bubble, prices can go up for a long time, but a small event, such as a negative news report, can suddenly burst. Realize that prices can collapse unexpectedly and quickly.

More risks

In addition to the risk of forming a bubble, the AFM also points out other risks when investing in virtual currencies:

  • Virtual currencies are currently outside the control of the AFM and DNB
  • The rates of virtual currencies can fluctuate tens or even hundreds of percent per day.
  • Moreover, there is a real risk that the value of a virtual currency can fall permanently to zero and you will lose your money
  • Virtual currencies are vulnerable to cyber crime.
  • It is possible that others will gain access to your wallet through a hack, which may cause you to lose your virtual currency
  • If you lose your digital wallet’s password, it will no longer be accessible in any way.
  • This means that you have lost your investment for good
  • Many virtual currencies have little trade. This makes them vulnerable to price manipulation, for example by artificially pushing up the price
  • The large increase in popularity can attract providers with fraudulent intentions. For example, you can become a victim of a pyramid scheme with virtual currency.
  • This allows you to lose your invested money
  • The AFM advises consumers who want to invest in virtual currencies to get to know the product well.
  • Be aware of the risks and costs, spread your investments and never invest more money than you can miss.

Meer informatie over beleggen, vind je op de consumentenwebsite van de AFM.

Image: Cointelegraph