As I’m sure most of you have realized, cryptocurrency has transformed from an obscure afterthought to a mainstream topic in recent months. This all started with the cryptocurrency called “Bitcoin” increasing well over 1000% in 2017, going from being valued at $950 in January to an astounding $14,000 as of December 29th.[WC1] Many are investing at various stages in Bitcoin’s growth hoping to “get rich quick” adding to its popularity among investors as well as the general public. In fact, I personally have invested in Bitcoin and Ripple but have since sold my shares. The spike in foot traffic to popular crypto trading platforms such as CoinBase have caused the site to slow to a crawl, infuriating would-be investors who worry their trade requests won’t be processed before Bitcoin’s value changes yet again. Just recently, in fact, Bitcoin’s value has dropped to a low of $8,760.47[WC2] , causing many to doubt its possibility of a secure investment.
What is Bitcoin Actually?
Many invest without really understand the technology behind Blockchain mechanics, creating a dangerous naivety, especially in the investment world. So, what is the Blockchain? All hours of everyday, computers, known as miners, use computing power to package groups of information into neat blocks. This not only allows for organization of information, but also encrypts the data in the process, creating a more secure network. In exchange for their services, each miner is awarded a certain amount of Bitcoin, effectively making an anonymous digital currency. However, after people became excited about buying into this new technology, the investment market formed around the idea of buying and selling segments of this currency.
Alternatives to Bitcoin
According to Kraken, another cryptocurrency trading app, there are now over 20 currencies trading over $1.00 that have popped up everywhere as alternatives to Bitcoin. More and more of these are being created to compete with the “big dogs,” such as; Bitcoin, Etherium, and LiteCoin. While these new currencies may seem like an opportunity to get ahead of the curve and make a big profit, it is important to remember that these are the equivalents of penny stocks in the stock market: they are somehow even more volatile than the bigger players in the game. In a new industry like this, I encourage readers to use more reputable trading platforms and stick to known currencies as scams involving crypto are becoming more and more prevalent.
Surprisingly, these online currencies are being taken into consideration by major companies, including Kodak and the Long Island Iced Tea Company. Kodak hopes to release its KODAKCoin in an effort to allow photographers to easily receive payments for their art through their very own Blockchain platform, KODAKOne. [WC3] In a different fashion, the Long Island Iced Tea Company has done a complete 180 and will turn their focus away from cold drinks, towards investments in Blockchain technology, even going as far as changing their name to the Long Blockchain Corporation. [WC4] It is now apparent that transitions into this new industry have become increasingly popular for large companies who clearly aren’t immune to the Bitcoin fever, as more and more are turning to Blockchain technology.
What does the Future Look Like for Cryptocurrency?
It’s hard to tell honestly. The technology is very promising, however with no regulations or the fact that it isn’t backed by anything makes me unwilling to invest large amounts into it. However, this system has worked very well for some. Erik Finman, a high school dropout from Idaho, invested $1,245 from his grandmother into Bitcoin and within 3 years turned it into $1.5 million. The charm of the digital decentralized currency, while appealing, does not outweigh the potential for financial ruin to those who get overeager with their investments.
My advice to eager investors looking to take a piece of the cryptocurrency market? Do your homework. Too many people investing in these revolutionary concepts have little to no clue what cryptocurrency really is beyond a quick money-making scheme. When I questioned a group of student investors in Bitcoin about what it really is, I heard loosely thrown terms such as; “the Blockchain” and “untraceable currency,” but not a single member of this group actually understood the concept behind the thing they insisted on throwing their money towards.
So many people looking to grow their wealth turn to the next trend in the world of business looking towards volatile, short-term investments with huge upsides. I can’t stress how important it is to consider the gigantic downsides as well. When I see these people funnel large amounts of their savings into the next big thing without doing their research, I can’t help but cringe. While you could double, triple, or even quadruple your money, you could just as easily be left with nothing. So please, I beg of you, do your research before you invest!