Is Bitcoin trading worth the risk?

If you bought the world’s best-known crypto-currency at the right time, you could be a millionaire by now. Or a multi-millionaire. Early adopters bought the digital currency for just a few US cents after it was invented by unknown hackers in 2009. At time of writing, the price stands at around $50,000.

By the time you read this, it could have gone anywhere…

A fantastical get-rich-quick investment like this one inevitably gets people excited. Every time the price surges, more people are sucked in. With every investment, you have to balance the risks against the rewards. Leaving money in the bank carries almost no risks, but gives you next to nothing in return, at least today.

Stocks and shares have greater risks, but greater potential rewards. On the risk/reward scale, Bitcoin is off the map. This year alone, its price has jumped by almost $10,000 in a single day. It has also fallen by $10,000 in a day. Which is great if you buy at the right time, disastrous if you get your timing wrong.
Bitcoin looks like easy money but it isn’t, it’s dangerous money. 

Ignore past performance. Just because Bitcoin has flown to the moon, doesn't mean it will carry on flying to Mars, Jupiter and beyond. It might crash back to Earth. 

If it does, you could take months to recover your losses. Or years. You may never recover them. That's the risk you take.

Bitcoin has no intrinsic value and few practical uses. Only a handful of companies accept it as payment for goods or services. How can they, when neither seller nor buyer knows what it's going to be worth from one day to the next?

People buy and hold Bitcoin for a simple reason. Speculation. They hope to get rich quick too. The problem is that moment has passed.

If you want to make a million from Bitcoin, you should have bought it years ago, when it was cheap. 

If you’re still tempted, reduce the dangers by following these simple investment rules. Invest little and often. Do not throw in a big lump sum all at once.
Only hold Bitcoin as part of a balanced portfolio, that includes shares, cash, bonds, gold and property.
Do not invest more than 5% or 10% of that portfolio in crypto assets. 

If you can't afford to lose money—not many of us can—then avoid Bitcoin altogether.

There is nothing wrong with wanting to be a millionaire, unless you wind up bankrupt instead.

Read more: What is financial infidelity?

Read more: These seven pension mistakes could destroy your retirement

Keep up with the top stories from Reader's Digest by subscribing to our weekly newsletter