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Color of Money: Don't let the roller coaster excitement around bitcoin distract you from the basics of investing

Michelle Singletary on

WASHINGTON -- The seesaw volatility of bitcoin poses a perfect opportunity.

Let's talk about how the average American millionaire next door accumulates wealth. And, it's not like what you see on television.

Bravo's "The Real Housewives" franchise of shows highlights a glamorously wealthy world of champagne brunches, exciting yacht parties and spiral-staircase homes. (Although in some cases, the women aren't wives, and they aren't really rich. But no matter, they look and act the part.)

All this exposure to the lives of the rich and famous serves to increase the feeling of "FOMO," or the fear of missing out. So, when you see a certain investment getting a lot of attention because it's surging in value, it might make you feel that this is your chance for a shortcut to wealth.

That's how you might feel about bitcoin. You don't want to miss out, so you're thinking, "why not invest?"

Bitcoin is a so-called cryptocurrency -- actually lines of code -- stored on a computer or held by a third party in a virtual wallet. It's yet to become a widespread form of payment. But enthusiasts are speculating that it might one day.

 

Renewed interest in bitcoin recently pushed its price up to more than $13,000. And just as quickly, prices started to fall. At one point, bitcoin dropped by more than $1,800 in a matter of minutes.

Douglas Boneparth, a certified financial planner based in New York, has a frontline perspective on investing in bitcoin.

In 2014, Boneparth teamed up with a childhood friend who has a doctorate in neurobiology. They split the cost for the purchase of a $6,000 computer, called a "miner," which they needed to solve a complicated math problem that leads to the reward of bitcoin.

They were successful in getting bitcoins. But the problem that the computer solves becomes so complicated that, in six months, the computer couldn't keep up and became a "glorified paperweight," Boneparth told me in a recent interview.

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