It’s the hottest trade of the decade, and it’s already outperformed stocks, bonds, gold and real estate.

In April 2011, Bitcoin was valued at just 96 cents.

Nearly five years later, it’s skyrocketed to $15,979 – a return of 1,664,379%.

That means every $1,000 invested at 96 cents back in 2011 is now worth an unbelievable $17 million.  In short, it’s taken the world by storm.

In its simplest terms, a bitcoin is a form of cryptocurrency, or an encrypted decentralized digit currency transferred between peers and confirmed in a ledger, a process referred to as mining.  As a peer-to-peer system, transactions are carried out between other users, eliminating any cost incurred by the intermediary.

In short, transactions are made with no middlemen.  There is no bank or government involvement.   There are no transaction fees and no reason to give your actual name.

It’s just about revolutionized transactions.

Even billionaires, such as Michael Novogratz, are jumping on board.  “Ten percent of my net worth is in this space.  It’s the ‘best investment of my life,’” he says, as quoted by Coin Telegraph.  “The Nasdaq got to $5.4 trillion in 1999, why couldn’t it be as big?  There’s so much human capital and real money being poured into the space and we’re at a takeoff point.”

Former PayPal COO, David Sacks, recently tweeted that such currency is the “best candidate we’ve had in awhile for Web 3.0.”

In fact, the number of businesses accepting cryptocurrency is growing by leaps and bounds.  Merchants around the world are beginning to accept bitcoin, for products from web hosting to pizza and manicures.  Microsoft, Intuit, PayPal, Dish Network, and Overstock.com are some of the biggest merchants accepting it.

Even Fidelity Investments rolled out a program in August 2017 that allows investors to track their cryptocurrency holdings right alongside traditional assets.

Clearly, bitcoin is popular.  We’re even seeing Bitcoin ATMs popping up.  In fact, according to Coin ATM Radar, there are now 1,001 Bitcoin ATMs in the U.S.

And it’s getting support from the likes of Japan and Russia.  Japan just legalized cryptocurrency as a payment method.  Russia is seeking to recognize it as a legal financial instrument in 2018, as a way to tackle money laundering.

The biggest thing to understand here is the risk, though.

No one can tell you what the price of this currency will be tomorrow or next month, or even if it’ll be here in a year. And at the moment, it’s clearly in bubble territory.

And as we know from history, the markets are littered with popped bubbles from the Dutch tulips in the 1600s to the dot.com bust and the U.S. housing market implosion.

It’s our responsibility to be aware of the potential for downside, or we could very well repeat the mistakes of the past.  In fact, not too long ago, a market correction sent coin prices plummeting, reminding us of their extreme volatility.

  • In June 2017, Bitcoin fell more than $200 between June 25 and June 26.  Anyone that conducted transactions during that time would have seen a 7% to 10% decline in deal value.
  • In September 2017, Bitcoin plunged from a record high of $4,921 on the first of the month to $2,957 by the 15th on concerns of increased scrutiny from Chinese officials and a host of experts that have slammed the currency as a fraud.

In short, Bitcoin is red hot right now, but it also carries a huge amount of risk.

Remember, nothing goes up forever.