Cryptocurrency and Bitcoin Investment

Want to invest in something that will make you sound cool? Check out cryptocurrency…with caution!

If you want to double or triple your allowance money, last year would have been a great investment opportunity for you to buy some “bitcoins” – a type of cryptocurrency – because its value has since septupled from $613.50 on September 7, 2016 to $4600.03 on September 6, 2017; with its highest offer $4792.29 on September 1, 2017 – not so long ago. That means, if you had bought one bitcoin last year for $600, you would have ended up with $4600 by the beginning of this September. Hey, you just made 4k by owning ONE bitcoin.

Screen Shot 2017-09-28 at 4.25.09 PM.pngSo, what is this so-called “cryptocurrency”? Literally, from its Greek root prefix, “kryptós”, it means “hidden” or  “secret” currency. According to Wikipedia, “Cryptocurrency is a digital asset designed to work as a medium of exchange using cryptography (the practice and study of techniques for secure communication in the presence of third parties called adversaries) to secure the transactions and to control the creation of additional units of the currency”.  In other words, it is a type of currency that people can hold as a source of wealth, not regulated by governments or banks. It is invented for many reasons, including allowing people to purchase goods on the internet privately without danger of personal information being leaked, and providing an alternative way to preserve purchasing power for fiat currency simply doesn’t work any more. In short, cryptocurrency is meant to be a quicker, cheaper, and safer form of payment. One very important thing to remember is that cryptocurrency is completely digital-based, so you won’t see people virtually carrying a bag of bitcoin let’s say.

Now, let’s dive into bitcoin more in depth. Bitcoin, as mentioned above, is one type of cryptocurrency. It was invented by an unknown programmer, (hah, really hidden and secret), and was released in 2009 as open-source software. Bitcoin became the center of the public’s attention since the February of 2015 when over 100,000 vendors started to accept this type of payment. Even though bitcoin was originally invented as a type of payment, people tend to invest in it like making investments in precious gold rather than actually using it for purchases on a day-to-day basis.  

With the increasing value of bitcoin, there is a lot of debate amongst people about whether bitcoin will be the alternative trustworthy currency to invest in. People who support this type of currency argue that bitcoin represents  authentic investment with a certain level of risk, but it is supported by most nations’ governments without having to be tied to the national economy, which they perceive as a good thing. However, people in opposition claim that bitcoin has been used frequently for illegal activities in the past, and it is not being regulated by any government. Because of this fact, they think bitcoin currency will never get accepted as the mainstream with $5000 as the cap of the market. They question the volatility of bitcoin, and for good reason, seeing that it increased its value by so much in a short span of time – implying, with equal legitimacy, that it is just as likely to drop unexpectedly.  

The concept of cryptocurrency is not new, but it came into the public eye relatively late. At this point, it is hard to say whether the market of bitcoin, or any other type of cryptocurrency, will continue to flourish. Especially, recently, the People’s Bank of China announced that the government of China has officially banned initial coins offering, which is the fundraising activity for cryptocurrency. They claim that this type of unregulated sale violates the laws of China. This political intervention made the formerly-booming cryptocurrency market decline sharply.

Will bitcoin weigh the same as gold in people’s hearts one day? Will bitcoin start replacing other currencies, especially in the field of e-commerce? Will this industry collapse one day? Is bitcoin just a bubble, after all? We don’t know yet. But one thing is for sure, you should definitely start exploring the financial market, so you won’t miss the next chance to “decuple” your pocket money!

For more information, visit CNBC or check out this explanation or this article, both from the Wall Street Journal.