Some people consider cryptocurrencies a gold mine, others consider it a scam. While the world is debating the legitimacy of Bitcoin and it’s cyber siblings, the white noise is cancelling out the actual news: Blockchain is a revolutionizing technology taking over the world.
With warm toes buried in ivory beaches stretching into the infinite abyss of blue seas and sunny skies, a hand cold from the condensed surface of the tall glass and face caressed by the warm beams of the sun, the pursuit of happiness typically seem to end in tropical dreams of palm trees and piña coladas to most people nowadays.
Whether it’s old money or lottery winnings, the green beast of envy quickly emerges in most of us at the thought of other people being able to do what they want whenever they want, no matter the cost. Over the last few months, the trend of the extremely volatile crypto currencies has moved the dream of financial independency within everyone’s grasp, making the dreams of sandy sunny gardens of Eden feasible for all of us.
Cryptocurrency has emerged from the dark web and deep basements, where the concept of a decentralized currency – a currency without an authority such as traditional central banks, like Federal Reserve in the US and the European Central Bank – has been developed alongside the underlying technology, called blockchain, and is now out in the open and in the awareness of most modern people. This new kind of currency is an entirely different species than the traditional currencies that we know of in the world of today.
Crypto cowboys are first on board
“Cryptocurrency is the tallest branch on the tree of technology that has blossomed,” says economist and crypto investor Wojciech Przybyszewski, who has worked more than a decade in an investment fund.
Disclaimer: Crypto investors are per definition biased sources, as the general value of the crypto sector goes up whenever new investors start putting their money into the sector. On the other hand, bank sources are also biased sources, as they lose money when the crypto sector rises.
“Right now, it’s mostly the buccaneering investors who are in the crypto game – the cowboys. But crypto is the future – we will see many waves of investors who are going to get bit by the cryptomania. It’s a matter of time before the older generation is on board as well,” said Przybyszewski.
Money is power, money is usually regulated by banks, and these banks are regulated by people who de facto hold all of the power. The ambition behind cryptocurrency is putting the power in the hands of the people who are the consumers. The future has announced it’s presence, and in the middle of 2018, the gravity of the impact of this new technology. As recently as late February, the European Union announced that they were standing ready to regulate crypto currency.
Especially Bitcoin has made it into the awareness of our civilisation, and the stories of success have spread through the internet after blossoming in basements and the close, yet so far peripheries of each of our social circles.
Investors with a gold fever
At the end of 2017, any Bitcoin-investor could in the period from
October 1st to December 16th see their investment rise with 340
percent – a profit greater than the common stock investor could
even imagine. As a rule of thumb, an investment in stocks will in
general create a profit of 5 percent per year. The second largest
crypto currency, Ethereum, rose 353 percent from October 1st to
January 13th. The rise of both cryptocurrencies were still dwarfed
by the profit that was obtained by investors in Ripple – from
October 1st to January 4th, the people with money in this
specific cryptocurrency had seen their investment increase by a
whopping 1795 percent, as a single unit of Ripple rose from 0,20
dollars to 3,79 dollars.
Since then, Bitcoin, now universally dubbed the crypto currency
of yesterday, has fallen by 45 percent, Ethereum has fallen 35
percent and Ripple is after a fall of 75 percent back at a price for
a single unit on 0,92 dollars.
“When something like cryptocurrencies is so volatile, it’s a
reflection of the intentions of the crypto investors – they only buy
a specific currency to sell it again at a higher price. Whenever
that’s the sole goal of the investment, it’s speculation and it is a
bubble. The price only rises on the expectation that the price will
rise. That’s what we’ve seen with crypto currency until now. That
doesn’t mean that the price levels of crypto currency can’t reach
even higher levels. But the higher the climb, the further the fall,”
said banker and chief economist at Sydbank Jacob Graven.
The uncertainty of the extremely volatile investment and the
lack of authorities to support in case you would be robbed or
hacked are the main reasons that banks in general advise their
customersagainst getting into the cryptocurrency game.
“A 100 dollar bill is worth 100 dollars. When you have a 100
dollar bill, you also have consumer rights – you have a bank, a
state and a legislation to back that you have 100 dollars, no
matter if it’s in cash or in your account. That’s due to regulation.
If your cryptocurrency is lost, robbed or hacked, you have
nowhere to go and no authorities can help you,” said Graven.
The future has a block and a chain
While China has banned cryptocurrencies by adding them to
their Great Firewall, the underlying technology of blockchain
seem to have gotten a hold of the world.
Sweden is looking to be the first nation state to have their own
crypto currency, e-Krona, and in Colorado, USA, an ATM that
allows the user to convert digital cryptocurrency into hard cold
American cash is open for business.
“The banks say it’s a bubble, but crypto has only gotten mainstream as recently as last year. It’s like the first stages of the internet: Not everyone had it in the beginning. As soon as someone comes up with a solution similar to a credit card, but for crypto currency, crypto currency will prevale everywhere,” said Przybyszweski.
Although Jacob Graven is critical of the current, unregulated cryptocurrencies, he admits that blockchain-technology probably is here to stay.
“The well known cryptocurrencies of today has less of a future, but blockchain-technology has a future. The lack of regulation is a problem, but for example, the Swedish central bank is looking into doing their own cryptocurrency. Perhaps it’s possible to develop something that has a future, but as of now, the crypto currencies does not have a future. Regulation is essential for a system to be able to exist,” said Graven.
The crypto cowboy is not worried about the prospects of cryptocurrencies.
“People turn 18 every day, more money get invested in cryptocurrency every month, the entire sector increases in value every second. It’s unrealistic to think that it can be shut down by now – it’s not thousands of people who are working with crypto and mining currencies, it’s millions. There’s a lot of new cryptocurrencies on the market right now, and in time, many will collapse – but several will survive. Crypto is the future,” said Przybyszweski.
WHAT IS BLOCKCHAIN?
Whenever one person decides to transfer an amount of money to a different person with the technology of blockchain, that transaction is a block that is added to the infinitely long chain of blocks that are earlier transactions. Several third parties will then approve the transaction.
These several third parties are called miners, and they’re not real people. In the early days of blockchain, any person with a CPU, as is attached to most computers, could set their computer to mine bitcoins at a small profit. Today, the sector and thereby the CPU-speed needed to make actual money had expanded, and any person with serious mining ambitions would set up an entire warehouse of servers to mine currencies.
Once the transaction is sufficiently approved – this takes only a few seconds – the transaction is completed and the block is added to the chain. As the blockchain expands, it also gets more secure and functioning.
WOJCIECH PRZYBYSZEWSKI CASE
“Through 2017 I watched Bitcoin soar, and like everyone else, I expected it to be a speculation bubble and that it was a matter of time before it would burst. But back then, I barely knew what cryptocurrency was or how important blockchain is going to be in the future, not to mention how much of the normal stock issuing that cryptocurrency will replace and is already replacing.
Cryptocurrencies was very hyped during 2017, but I don’t think we’ve seen the full potential yet. The technology is relatively young, and an entire industry is blossoming around cryptocurrencies. Crypto has come to stay. And thank God!
Like stocks, many cryptocurrencies pay profit to it’s investors. Therefore, an investment in these should equate investments in traditional stocks and bonds. People need to save some of their income every month, and a growing share should be invested in crypto.
I saw how dramatically Bitcoin soared, and I also saw the violent albeit natural fall as the market corrected. When people were panicking and selling their cryptocurrencies, thinking it was going to collapse, I spent all my savings on Ethereum after the price had dropped more than 40 percent.
Money thrown out of the window, they told me. Way too big a risk, they said! And it’s true – but in the financial markets, you’re rewarded for taking a risk.
The price went a little up, a little down, but was overall stable. It was boring. Then I learned about altcoins (alternative coins, ed.) that you can buy on a Chinese broker page, Binance. It was a whole new and secret world to me!
You can choose from about 100 different cryptocurrencies such as NAV, ADA and VIBE. You divide your investment funds between the letter combinations you like, and then you can lean back and enjoy the development. The price of these altcoins rise and fall – that’s why it’s important to have a diverse investment portfolio and not bet it all on the same horse.
Because it’s like a horse race – but with the wondrous quality that all of the horses win in the end.
My most humble monthly profit has been higher than any stock index manages to rise in a year.”