Updated: Feb 7
Most people enjoy discussing money. When they’re on to a good thing at least. A win at the track, a bonus, or a lottery. It’s one of the most popular topics on the planet.
Now, the rise of a new type of currency, crypto-currency, and specifically its star performer, Bitcoin, is the topic of heated debate in many corners, and in others, conspiracy and speculation as to how to catch the next massive wave of growth.
In fact, since 2012, Bitcoin or BTC, as it is known online, has risen over 8000% in value. Perhaps this makes traditional currencies like the USD look positively sluggish, with barely a 17.25% rise in the same period.
Many have ridden the highs and the lows of BTC, which has seen the currency peak at $63,588 (EACH!) before bottoming out to $30,849 in the last 24 months.
That’s still, arguably, the market setting the value of EACH Bitcoin at being over 30,000 more desirable than a single US Dollar. It’s a position that central banks, and leading financial institutions, simply aren’t ignoring any longer.
It’s a digital world now, and the way we do things has changed significantly. From the way we do business, to connecting with friends and family, learning, and importantly, trading, which has drastically changed in recent years.
As humans, our economic journey began with the barter system, progressed to coinage (gold and silver usually), then when they got too heavy, to promissory notes from a bank and finally printed money. We currently conduct most transactions online and digitally, using every advancement in technology available to us. But what’s next? What’s the future of these “online” transactions?
Some argue it’s cryptocurrencies. And before you worry there’s no worth or “intrinsic value”, ask yourself when the last time was you saw your current digital wealth (savings account, or bonds) piled high in notes, or even gold, at your local bank? Can you touch it? Can you view this “money” you feel you safely possess? How real is USD or GBP? Really?
These are the challenges being grappled with by a new generation of economists and technology entrepreneurs. Where central banks and governments once held a monopoly on our ability to buy goods and services, new options are now emerging.
Cryptocurrencies are virtual digital assets that function on a one-to-one basis and are widely used as a medium of exchange. Most cryptocurrencies use blockchain technology, which uses cryptography to create new units and protect the transactions. Cryptocurrencies that operate on a distributed platform can be an excellent alternative, or addition at least, to traditional currencies.
The First Cryptocurrency: Bitcoin
Bitcoin was the first modern digital currency invented in 2009 by a mysterious programmer named Satoshi Nakamoto. Satoshi intended to create a completely decentralised electronic payment system that is not reliant on the government or financial institutions. He focused on developing a decentralised network that is not dependent on central authorities or their servers.
When Bitcoin was introduced in 2009, only a few people understood its underlying technology, "Blockchain", but it quickly gained popularity and became the first modern cryptocurrency.
Many developers attempted to develop cryptocurrencies and failed miserably. Leading cryptocurrencies such as Bitcoin, however, continue to gain in popularity as a growing number of entrepreneurs and mainstream retailers have started accepting them as a form of payment. With the addition of hundreds of exchanges and wallets, the trading of these major Cryptocurrencies has also become much easier and more achievable.
Cryptocurrencies: Are they stable?
I would say no, not yet. Stable is a big word in the cryptocurrency world. That said, no one can deny that they are on the rise and stability will inevitably come. We can also not ignore the fact that most currencies have experienced challenges over the years. We are all familiar with images of people carrying wheel barrows full of Deutschmarks to the market for a loaf of bread in the 30’s. Now Germany is now seen as a European banker and a powerhouse economically. Recently Cyprus nationalised the savings accounts it held in national banks and South America is still a mess, trading oil for medicine while inflation soars. It is little wonder why, although far from perfect yet, there is a growing popular urge to find something better, or at least something new.
Can I get rich with Crypto?
Why not? Many have. Then again, if anyone enters a new market thinking they will get rich-quick, in my opinion, they often get what they deserve. Investment is a tricky business and not a gamble. Unlike, arguably, crypto at the moment. Nevertheless, we could argue that BTC has a long way to fall to get anywhere near as low as the USD again, and plenty of people hold those!
What’s next for Crypto?
Stability. The trend now seems to be focused on stabilising the waves. Flattening the wild peaks and troughs we’ve seen in so many cryptocurrencies. There are of course the speculators that want the waves to pound forever, but for mainstream adaptation, they do need to flatten. There is a lot of work, and funding, going into projects around “stable coins”, or cryptos backed by something of “value”, like a fiat currency (USD).
I myself favour the good old fashion shine of gold. It’s been the core of monetary systems for thousands of years and until only recently (thanks to the US discovering they could leave the gold standard and print paper money at will), was the way to ensure stability within national economies.
By way of full disclosure, I am working with a few people myself to bring a gold-backed token to market so I am a little biased here. Still, if you can argue against the idea of using real, physical gold as a means of payment, perhaps through a blockchain application, then I would love to hear it.
Conclusion: Worth a punt with the cash you can lose.
Whether we like it or not, the crypto-age has begun. It will take some adjustment for governments and regulators but sooner or later, as they always do, they will find a way to get their cut and gain control. The Bank of England even went so far recently as to signal it was investigating digitising the Pound and/or launching its own cryptocurrency.
A very good argument can be made, purely speculatively, that we are still on the ground floor of this thing and therefore a good time to “get in”.
I would always urge caution, but ultimately as the swings are still so wild, and as values over time mostly continue to rise for major coins, there can be little harm in a punt with a small sum you don’t care about losing.
After all, we’re all familiar with the stories of “a guy that bought £1000 worth of BTC like 5 years ago and is a millionaire now”. The numbers to get in are low, and the potential returns are huge. Perhaps that’s the allure.
As always, if you’re keen to chat about crypto, tech advancements in blockchain, the pro’s and pro’s of being a digital nomad or great whisky and enormous cigars, I’d love to hear from you, so drop me a line and subscribe here.