Three years ago, just after his 16th birthday, Eddy Zillan invested his savings — some money from his bar mitzvah, some from his parents, some he had saved up — in the cryptocurrency market.
“It just kept going up and up,” he told me. Within a month, his portfolio was worth $12,000.
Within a year, it was worth half a million. “It felt pretty good,” Zillan said.
Even before the price of cryptocurrencies skyrocketed in 2017, people like Zillan were starting to wake up to the idea that they might be a good investment. But over the course of that year, the price rocketed tenfold for the two biggest cryptocurrencies, bitcoin and Ethereum’s ether.
Some critics have warned that this kind of price inflation is the sign of a bubble. In December 2017, analysts pointed out that bitcoin had recorded the sharpest price increase of any asset in history. It even outpaced the tulips of Holland’s famous “Tulipmania” episode in 1637, which was previously considered the most extreme example of an asset bubble.
Others aren’t put off at all. Venture capitalist and early bitcoin investor Tim Draper assures me that in the future, “bitcoin will be the future of money.”
But will it? Is it practical for such a volatile asset to be used as a stable unit of currency? “Bitcoin is a currency. It should be treated as a currency. People don’t normally sell yen when they think it will appreciate against the dollar, but they still spend it,” Draper tells me.
“Bitcoin is a currency and should be treated no different than a dollar or a euro. The countries that recognize this will be the winners long term, since the great entrepreneurs and money will gravitate toward them.”
But what about the risk of a bubble bursting? “There are only about 20 million wallets out there, and there are 8 billion people on the planet,” Draper says. “It seems there is a lot more room to grow.”