Want to invest in cryptocurrency? Here's what you need to know

SAN RAFAEL, Calif. (KGO) -- This past November, Bitcoin hit an all-time high of $68,000, while another cryptocurrency, Ethereum, reach its record high of $4,800. Stories like that might motivate you to invest your money in cryptocurrency -- but before you do, here's what you should consider.

Lara Starr watched from afar stories of people getting rich putting their money in cryptocurrency.

Last year she decided it was time to do it.

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"I've been reading about it -- Blockchain, crypto blah blah blah. It sounded like, oh, it's nothing I know anything about, but people are making a lot of money," said Starr.

In one year's time, Starr has seen her investment grow more than 50%.

But she's not exactly rich. Her initial investment was just $40.

"I meant to do $50, but I don't know. Somehow I messed up and ended up only contributing $40," she said laughing.

Starr's strategy is a good one for her.

James Royal is an analyst with Bankrate.com He says the cryptocurrency market comes with huge risks.

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"The people that its best suited for are people with a high risk tolerance and have the ability to withstand losses, ultimately," he said.

When you invest in the stock market, you become a shareholder and own a small bit of that company.

Cryptocurrency has no value by itself.

"The value comes exclusively from what the next person is willing to pay for it. And in investing, that's what's called the Greater Fool Theory," said Royal.

He says the bottom line: only invest what you can afford to lose and invest for the long term.

VIDEO: SF man who can't remember Bitcoin password says he's 'made peace' with $220M loss
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Stefan Thomas says he long ago "made peace" with the reality he may never gain access to his $220 million bitcoin fortune.



Royal believes the biggest mistake people make is investing when the price is high and selling when it's low.

Lara has seen her $40 investment go as high as $99 and as low as $36.

"The fluctuations are not for the weak of heart at all," she said.

Both Starr and Royal agree, investing in cryptocurrency is not a get rich quick scheme.

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

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