5 Things You Should Know About Cryptocurrency
Facts you need to know even if you don't care about cryptocurrencies.
Since January 2009, Bitcoin, the first-ever blockchain cryptocurrency has produced a return on investment (ROI) of 8,900,000% in ten years. A $1 investment in 2010 would have matured into a whopping $90,000!
Sadly, very few people were aware of what bitcoin was, and even fewer found it worthy enough to spend money on acquiring it.
As of today, buying a whole bitcoin would set you back over $15,000. This hefty price tag has generated mixed reactions on the digital currency. While some believe the coin is still ‘cheap’ and expect more upside growth in its price, others feel it is an overvalued intangible ‘nothing’ that would crash and leave its investors in tears. Whichever side you’re on, knowing these 5 things are a must.
#1. Adoption is growing
The acceptance of digital currencies has steadily increased since its inception. Various use cases have been developed such as; payments, private transactions, decentralized data storage, smart contracts, digital identity, internet of things, and more recently decentralized financing (DeFi). The continuous innovation of use cases increases the adoption of blockchain technology and shows no signs of slowing down.
Fintech giants, Paypal and Venmo, have suggested the potential roll-out of cryptocurrency services on their platforms which boasts hundreds of billions of dollars in processed transactions each year. This would drive up the engagement of digital currencies and further its adoption in the financial sector.
Microsoft, AT&T, and Expedia already accept bitcoin payments for their services.
#2. Scams and Shitcoins
As with every environment where information is not evenly distributed, scammers prey on both newbies and experienced persons within the cryptocurrency space. Digital theft, phishing, fraud, and hacking are common because digital currencies are a constant target for criminals due to their anonymity and decentralized structure. An estimated $9.1 billion is lost each day to scams and this will continue to happen until suitable regulations and security frameworks are designed to prevent it.
A fair argument for cryptocurrency is that the U.S dollar is still the most used currency in carrying out illegal activities.
Shitcoins, on the other hand, are cryptocurrencies that diminish in value until they become worthless either due to fraudulent motives behind their creation or they possess value primarily based on speculation and therefore have no intrinsic value. These coins usually get dumped and lose value sharply, resulting in loss of investment capital.
#3. A threat to the government
Bitcoin has been touted as a peaceful protest against central banks around the globe. With the never-ending bailouts granted to big corporations and the continuous printing of money by governments without the backing of any physical asset(e.g. gold) other than the government’s approval, inflation rates continue to grow and erode the value of money.
The viral meme, ‘money printer go brrr…’ is directed at the government’s continuous printing of money to fund stimulus packages. This year, the U.S government granted over half a trillion dollars from public funds to undisclosed companies as coronavirus aid.
- Why do a few people get to decide when to create money out of thin air?
- Why are the identities of major beneficiaries of these monies kept classified?
These questions are getting asked more often with the increasing awareness that government-issued currency is money simply because the government says it is, and it can be awarded to select entities using ‘corrupt practices’.
A peer-to-peer payment network that is powered by its users with no central authority.
Decentralized digital currencies threaten the control of central banks and government authority by limiting their ability to dictate how much or how little money exists in the economy through monetary policies. The creation of a peer-to-peer payment network that is powered by its users with no central authority to track, tax, or block transactions threatens the control power of governments — a silent protest against corrupt governments everywhere.
#4. Institutional Investors are stocking up
Bitcoin has gained the interests of big money institutions. With more institutional investors demanding for the digital currency, its value is expected to grow over the coming years.
Some notable big money investors currently stocking up on the coin;
- Billionaire hedge fund investor — Paul Tudor Jones — revealed that he holds almost 2% of its entire assets in bitcoin.
- Grayscale Investment currently owns roughly 400,000 bitcoins and purchases over $100 million dollars worth of bitcoin each week setting it on course to own 3.4% of all bitcoin by January 2021. Grayscale also holds about $400 million worth of Ethereum (ETH).
- Fidelity Investments conducted a survey of 774 institutional investors and found that 36% of them own cryptocurrency or derivatives with 80% finding something appealing in the asset class.
#5. Arguably the most volatile asset class in the world
Cryptocurrencies are subject to volatile upward and downward movements that can result in great financial gains and losses. During a downturn, the price is often determined by FUD — Fear, Uncertainty and Doubt while FOMO — Fear Of Missing Out — causes a rush in the demand for the currencies during an upturn.
Daytraders and swing traders benefit from volatility by selling and buying cryptocurrencies at their highs and lows respectively.
Long-term investors, on the other hand, hold them for longer periods by storing them in digital wallets and look to reap future rewards if this asset class gains wide adoption.
Trading cryptocurrency is accessible to anyone with an internet connection but should not be practised without adequate technical knowledge. If you want to trade cryptocurrency, register on a trustworthy exchange such as Binance and start with small amounts until you are conversant with how it works to avoid losing your funds.
The cryptocurrency space still has a lot of maturing to do as the ecosystem appears to be missing certain regulatory and security frameworks. This has not stopped institutional investors who view it as a viable investment to continue stocking up on it.
Corrupt practices by governments and financial institutions have birthed protests and riots as people clamour for a systemic change and a financial revolution to bring equality to all. If the adoption of cryptocurrencies continues to grow and gain wide acceptance, it may be only a matter of time before cryptocurrencies unify the already global world by providing a global currency.
