The price of bitcoin hit a record high of over $41,000 on Friday, according to CoinDesk. It now has a market value of over $700 billion, and, as a result, pushed the value of the entire cryptocurrency market to surpass $1 trillion for the first time.
If you listen to bitcoin bulls, it’s just the beginning.
“It’s probably going to $100,000, then $150,000, then $200,000,” Chamath Palihapitiya, founder and CEO of Social Capital, told CNBC’s “Halftime Report” on Thursday. “In what period? I don’t know. [Maybe] five or 10 years, but it’s going there.”
With all the hype, many people are wondering if they should invest in bitcoin. But the cryptocurrency also creates a wide array of concerns: Some worry that bitcoin is a bubble, too risky to invest in or susceptible to fraud, to name a few.
CNBC Make It spoke to bitcoin and fintech experts about the common concerns surrounding the cryptocurrency.
Is bitcoin too risky for the average investor?
Compared to most investments, bitcoin “is a highly volatile, highly risky investment,” James Ledbetter, editor of fintech newsletter FIN and CNBC contributor, tells CNBC Make It. “If you look historically at the price of bitcoin, there have been a number of occasions where it’s really spiked and then comes crashing down really quickly.”
(For example, after rallying to nearly $20,000 in 2017, bitcoin’s price collapsed and lost a third of its value in a single day, and in 2018, it dropped to as low as $3,122, wiping out billions of dollars from the total cryptocurrency market value.)
While that can mean big returns, it can also mean big losses.
That’s why some, like investor Mark Cuban, liken bitcoin to gambling and advise investing only as much money as you can afford to lose.
“You have to at least be mentally prepared and financially prepared that [a crash] could happen again. It could happen tomorrow,” Ledbetter says.
Of course, despite its high selling price, “you can go and buy as little as even $5 of bitcoin because there is the ability to buy fractional shares called satoshis,” points out Anthony Pompliano, co-founder of cryptocurrency hedge fund Morgan Creek Digital Assets and a bitcoin investor.
“Just start very small, do research, learn about it,” Pompliano says.
(If you do decide to invest, Pompliano supports holding bitcoin long-term. By design, there is a limited supply of bitcoin, so bitcoin bull Pompliano believes as demand increases, the price will as well.)
Are bitcoin ‘wallets’ safe?
In July, a widespread Twitter hack compromised many celebrity accounts – including that of President-elect Joe Biden, former President Barack Obama and Tesla CEO Elon Musk, to name a few – in a bitcoin scam. As a result, hundreds of thousands of dollars in bitcoin had been transferred under false pretenses.
For many, this prompted questions around the safety of bitcoin.
“There have been multiple examples of bitcoin theft and fraud that I think would give pause to the average investor, particularly if you were going to invest a…