Bitcoin and cryptocurrency in 2018
It seems these days most have an opinion on bitcoin and other brands of cryptocurrency. When everyone from your next door neighbor, to the mailroom clerk, to your favorite local barista not only has an opinion, but a fool-proof strategy for getting rich quick, it may be an indication the market is getting overheated.
Although it has calmed from its market high prices of six months ago there is still a lot of misinformation, disinformation and just overall lack of understanding about the new world of cryptocurrency or “crypto”. Is it a bubble, legitimate or a Ponzi scheme? Are you at a disadvantage for not getting in early? Will the government eventually regulate this? Much confusion is out there, even among the experts.
Here are a few facts and tools to help you sift through it all:
Uncertainty and Volatility —
Since its initial release nine years ago the peer-to-peer network where transactions take place directly without the use of a financial intermediary has been a bit of a nebulous idea. The thought that there was no central bank, no regulatory body, not even gold to back up the currency lead to instability and erratic trading in the past. The value of the “coins” can be transferred can be transferred securely via any devise or mobile app much the way PayPal payments work. The transactions are verified through nodes in the network through cryptography and recorded in a public ledger called the blockchain.
The underlying problem though, no one quite knew what this was.
For those market watchers the more recent news of this past week is that crytocurrencies fell by $20 billion in a single day! The freefall trading fell to $320 billion of global value from $340 billion. Bitcoin itself lost 12% of its total value during that period. Most osmaller currencies such as Ripple, Ethereum and Litecoin followed suit. Bitcoin has also declined in value over 50% from its all time highs just six months ago.
The decline last week, however, occurred mostly as a result of the news on the news of a hacking attempt of South Korean exchange Coinrail. This has renewed fears of the underworld connections surrounding crypto in its early years with ties to the dark web and drug-trafficking activities.
Movement Toward the Center
Alternatively, we could find ourselves on the cusp of a watershed moment such as the late nineties when investors and the general public were trying to wrap their heads around companies with silly names like Yahoo and Google built around unknown ideas like “internet-search engines”, or a little known book-selling platform named for a South American rainforest in Amazon (AMZN: 1,683.00).
Why do I bring this up? Because, with over $916 billion in assets Goldman Sachs is rarely wrong. The highly regarded investment bank just announced they will be opening virtual currency trading later this year. And just as it invested in early tech this platform is also expected to thrive. Susquehanna International Group has done so as well. Both the New York Stock Exchange and Chicago Mercantile Exchanges will be operating futures markets pegged against the currencies. Crypto is not only legitimate. It is poised to make big gains, these major financial players would not get involved otherwise.
Overall the market is still wild west territory for now. It is still too far out to announce Bitcoin has “arrived”. One should still have a healthy degree of skepticism. There is a tremendous amount of potential, however, and crypto will be here to stay as an alternative currency. Much is uncertain about its future. Invest wisely.