Bitcoin is one of many cryptocurrencies: digital currencies that aren’t backed by governments or banks. It relies on a decentralised peer-to-peer network called blockchain – a digital ledger that uses complex calculations to record all transactions. For years you could buy bitcoin for the price of a restaurant meal. By December 2017 bitcoin had soared in value to AU$25,410. In mid-January 2018 bitcoin had tanked to AU$12,893.

A fundamental rule of investing is big returns come with big risks. Another is to only invest in something you understand, and plenty of people don’t fully grasp how cryptocurrencies work.

The problem is, crooks do. A report by the University of Cambridge notes that 22 per cent of bitcoin exchanges have experienced security breaches, and less than half in the Asia-Pacific, Europe and Latin America hold a government license.

For my money, a good investment is backed by a quality asset: shares in a successful company, a well-located investment property, or units in a managed fund.

As it stands, cryptocurrencies are largely unregulated, and without the backing of an underlying asset there is no reason why their value should continue to rise other than demand from over-exuberant investors. If you plan to invest in bitcoin, my advice is to only tip in money you can afford to lose.