Small business entrepreneur triples her money with Bitcoin - but beware the risks

On paper, Dee Heath looks like the poster child for bitcoin speculation. The small business entrepreneur invested $5000 in Bitcoin and in three months it turned into $14,000.

Her day job is a pole-dancing fitness business in Sydney's western suburbs. She's tech savvy and has been following the rise of cryptocurrency for some time.

She is so impressed with the return that she is considering becoming a full-time investor in virtual currencies.

But Michael McCarthy, chief market strategist at CMC Markets, said the risks of virtual currency investing are considerable. "They are a punt," he said.

Ms Heath is well aware of the risks. "You need to be a long-term investor who doesn't stress out if there is big dip," Ms Heath said. "I only invest what I am willing to lose." she said.

"I really love the idea of online currencies and I think that everything is shifting so online now that I see a lot of potential in it," she said.

As Bitcoin moved up sharply again this week, after breaching $US5000 last week, the House of Representatives Standing Committee on Tax and Revenue heard evidence on Wednesday about virtual currencies and tax.

Most governments around the world are only starting to come to grips with the impacts of cryptocurrencies, which can be invisible to tax authorities, and to the "blockchain" technologies that support them.

Kevin Hogan, the member for Page in NSW and chair of the committee, said there would be problems for governments if virtual currencies become widely accepted and remained outside regulation.

"If people choose to go 'off the grid' and it is fully encrypted, that presents challenges," Mr Hogan said

However, there are also opportunities. If the Tax Office embraces blockchain and accounting software packages embrace it, the collection and payments of taxes could be much more efficient, he said.

"However, if these cryptocurrencies emerge in greater numbers, certainly the government will need to adapt to some of that to make sure that the tax payment system is included in that," he said.

He said we are still a long way from widespread acceptance of virtual currencies, but that the government wants to get on the front foot.

Some governments have recently made moves to control and limit the growth in virtual currencies.

Bitcoin fell to about $US3200 last month after China's central bank said it was cracking down on initial coin offerings and virtual currency exchanges. It come back even stronger, passing $US5000 last week before rising a further another $US500 this week.

Last week Jamie Dimon, the chairman and chief executive of JPMorgan Chase, said governments around the world will "crush" Bitcoin before long.

He noted recent moves to curb the circulation of Bitcoin in China and an initiative in Japan to launch an electronic currency pegged to the yen.

These were signs of authorities getting a proper grip on virtual currencies, he said, because "they like to know where the money is, who has it, and what you're doing with it".

"I don't personally understand the value of something that has no actual value," he said. "If you're stupid enough to buy it, you'll pay a price for it one day."

Blockchain is an online ledger controlled by a global network of computers, in which records are distributed across the network, it cannot be hacked or falsified as easily as information held in a single repository.

Virtual currency is just one of the early applications of blockchain technology.

Bitcoin's price in US dollars has increased sixfold since the start of this year.


This story Small business entrepreneur triples her money with Bitcoin - but beware the risks first appeared on The Sydney Morning Herald.