• Should you bet on Bitcoin? Here are the cryptocurrency's benefits, risks

    By: Lauren Seabrook , Jason Kelly

    Updated:

    Imagine if cash and coins were replaced by a digital wallet that had a unique code, similar to a fingerprint.

    Its value is verified not by the Federal Reserve System but by thousands of people worldwide who confirm transactions.

    That's the model of Bitcoin, a cryptocurrency that some haven't yet heard of and that others have difficulty understanding.

    Read: What is Bitcoin? What you need to know about cryptocurrency

    Curiosity among investors has propelled the global payment system's value.

    David Allen, a managing partner at Security Financial Management, a financial planning firm, said he has been following public interest in the electronic currency.

    "There (are) people messing around with it, trying to understand it," he said. "I think -- many of them -- very carelessly."

    Read: Currency of the future? Some argue it's Bitcoin

    The volatile investment has lost more than half of its value three times but bounced back. It reached its peak value of almost $20,000 in December.

    "You look at past bubbles (and) nothing has even compared to the speed that this thing is rapidly firing (at)," Allen said. "Everything that goes up like that, it comes down."

    Allen said he vividly recalls past busts such as when the Dow Jones Industrial Average experienced its poorest performance and when home foreclosures blanketed the state. He warns people to be cautious about investing in Bitcoin.

    Read: Hitching the wagon to bitcoin and hoping for the best

    "They go crazy on it. They put their life's earnings into it," he said. "There's going to be some winners -- and there have been some winners -- but there's going to be more losers than winners."

    Allen said those interested in Bitcoin should invest no more than 1 percent to 3 percent of their savings.

    Kay Russell told Channel 9's Lauren Seabrook he accepts Bitcoin at The Eastside Barbershop in Orange County's Union Park neighborhood.

    Read: 50 Cent 'forgot' about his bitcoin collection that's now worth millions

    Russell said he uses social media, such as Instagram, to advertise that he accepts the digital currency.

    "I really think it's the future," he said. "Maybe in five to 10 years we won't actually use paper currency."

    Large companies, such as Amazon.com, Fidelity Investments and Goldman Sachs, have already explored incorporating the crypto concept into their business models.

    But many amateurs continue to invest in Bitcoin, which could burst its bubble.

    "Proceed with caution," Allen said.

    Read: Weiss Ratings grades cryptocurrencies: Ethereum gets a B, Bitcoin a C+


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