Filipinos who want to jump onboard the cryptocurrency bandwagon are being urged to exercise “extreme caution” when speculating on Bitcoin and other forms of virtual money due to their inherent volatility that could easily result in large losses for inexperienced investors. The warning was issued by the Bangko Sentral ng Pilipinas in a publication released late last week to help educate the public on both the benefits and dangers of the new technology-based medium of exchange that has also become a popular asset for retail investors.
“Because of price volatility, virtual currency holders may incur significant losses when trading or investing in [them],” the central bank said. “While virtual currencies were not initially designed to be used as an investment product, some people speculate on them, which adds to the price volatility.” Bitcoin—an internet-based form of exchange based on a secure form of moving information called blockchain—gained popularity late last year when its price spiked from mere cents to a peak of around $20,000 a unit in early 2018.
Its price has since declined sharply and is now worth only $6,800, resulting in large losses for late-coming investors who bought in at the peak. The BSP pointed out that, as with any other type of investment, prospective virtual currency investors should know and fully understand the nature of cryptocurrencies before speculating or investing in the product.
“The public is advised not to blindly follow the crowd, adopt herd mentality or engage in speculative transactions,” the central bank said. “The public should exercise extreme caution at all times when dealing with virtual currency products and transactions in general.” According to the central bank, “virtual currency” is a general term that covers different types depending on business model—centralized (for example, one entity or individual issues the virtual currency); decentralized (no central repository or administrator but several entities/individuals maintain the currency); convertible (they can be exchanged to fiat currency and vice versa), or cryptocurrencies.
Cryptocurrency is a type of virtual currency that uses cryptography—a method of storing and transmitting data in unreadable form so that only the intended receivers can read and process it. This allows cryptocurrency transactions to be carried out in a decentralized manner by a group of users. Read more from business.inquirer.net…
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