2017 was the year in which these digital coins totally skyrocketed and reached the eyes and ears of the mainstream. What before was a thing of nerds and terrorists, is now a broad concept which is growing exponentially every day – with some natural drops in between – as if the sky was not even the limit. I regret having come across cryptocurrencies only about five months ago – as before it was just a name in my head which I had not lost even a second thinking about (“Bitcoin? Fuck that, I want to book my next trip to Latin America”) – since the golden era of turning a millionaire with just USD1000.00 are gone. Nevertheless, I strongly believe there is still plenty of room to invest and to gain a lot of money. Whatever the counter arguments are, I am here to tell you not only why they are false but also how they can work to your advantage regarding cryptocurrencies:
“They have no inherent value”
Ok, I can agree partially with this point, as these coins are just source code…but so what? When I look at a Bitcoin which was already worth 16,000€, I do not really care whether it has behind him a gold reserve or pure speculation.
But by the way, let me tell you about value and how subjective it is. When you go having dinner in a luxury restaurant, in which you pay USD50.00 for a steak, is the difference compared to a local budget restaurant that worth? Ok, the environment might be nicer, the food much tastier and the service way better, but you are indeed paying for something totally subjective and whose perception of value can vary from person to person.
When you go to a normal soccer match, in which you pay EUR20.00 to support your beloved team, or when you go to watch the world cup’s final, paying a price of EUR1000.00 for the ticket, is there really a big difference between the two matches? Is that huge discrepancy justifiable? In the end, everything is relative and dependent on perspective, and so is the digital money.
Furthermore, and talking about fiat currency, what it is indeed its value? The paper it is printed on? Not exactly. It is only valuable because it is accepted under governmental laws and cannot be replicated easily. But guess what? Bitcoin and other digital coins can be not be replicated either. They have a very complex cryptography which impedes any security breach (the breaches which happen are actually because people are careless, not because the coin itself is weak in terms of security). The only thing which is actually (still) missing is its worldwide acceptance as a form of payment.
In addition, when you invest in a concept which can literally change the world, based on advanced technology and on platforms which can facilitate transactions (aka turn them into immediate and cheap and with no borders), then perhaps you are paying for the best value you can think of.
“They can be stolen easily”
Yes they can, but perhaps not so easily as your bank or your government do with your regular money. When you are exchanging and only working with fiat money, you are already losing in the first place. The “central power”, being through taxes, fees or fines, will always find ways to extract as more money as it can, leaving you most of the times only with the minimum acceptable to live. In addition, what to say when there is a worldwide conflict or perhaps just a conflict or war in your country? Yes, that is right: you suddenly can lose access to all your money. And what to say about financial crisis? Think about 2008: everyone thought they were doing clever investments, where in the ends these came out as pure garbage which wrecked the whole economy.
But do not think that the danger can come only from the major players. When you exchange normal money, you are in a constant risk of being stolen. Imagine you are withdrawing money and suddenly a van filled with bad guys comes and they “ask” for some donation? Well, suddenly it was just two salaries of hard work which vanished. Or when you are buying your favorite shoes in Amazon in a supposed protected wi-fi, your neighbor hacker might be stealing your credit card details, turning your next days in a terrible headache.
So as far as I know, to have encrypted money which you can store in a hardware wallet, in a very old school style of hiding it beneath the mattress might not be as dangerous as the other normal options which are usually seen as secure. Ok, someone can enter your house and steal your belongings or perhaps you can bring your house on fire but, if we think about life, there is not really anything which can be 100% risk free.
“They can never be implemented and serve as a form of payment”
History itself keeps reminding us how things change and how there are different cycles: in the beginning, way before Jesus Christ was born, it was all about exchanging animals and objects such as shells. People knew exactly what they were trading and had a real care for their belongings, as they were literally their livelihood. Later in time, gold and other precious metals were found and they soon became the main element for making transactions among humans.
In 600 A.D, the King Alyattes of Lydia – what is today Turkey – minted the first official currency, whose coins were made from electrum (a natural mixture of silver and gold). This was the first standardized system of coinage which allowed trade to be made consistently across the mediterranean sea. It was also during this flourished period in Lydia that the first gold coin was minted. Nevertheless, it was only around 1250 that the gold coins started to be used in mass for exchanging goods throughout the whole Europe – this was perhaps the first time in history which the notion of “international commerce” came out.
Around this same era, after the travels of Marco Polo to China, the idea of paper money was brought to Europe for the first time. However, gold and coins still ruled until the XVII century, where the banks started using bank notes. They cleverly understood that it would much easier to give depositors and borrowers some “piece of paper”, instead of carrying around endless coins (conversely, this paper money could then be exchanged for silver and gold coins).
And so this type of money was the one used as the norm until the XX century, where John Biggins invented the first credit card, something which was a niche – like cryptocurrencies are today, as on those times no one actually believed that one would be exchanging money with just a piece of plastic – until the credit boom in the 80s, which led to the total standardization of the credit card. Already in our current century, with the dissemination of the internet or the use of smartphones, the concept of mobile payment was an innovation which we can no longer live without?
So you see the trend here? Everything changes, and so does the money. And if all other previous forms of payment succeeded, why can not we think that cryptocurrencies will follow the same path?
“The market is full of frauds, ponzi schemes and scams”
JP Morgan CEO Jamie Dimon already called Bitcoin a “fraud and that if you are stupid enough to buy it, you will pay the price for it one day”. And if you consider the opinions and arguments of all the bankers, financial analysts and economists around the world regarding the cryptocurrencies, then I am sure that neither you nor I would ever invest in digital money. Add to it the fact that it is both associated with noble people such as drug/arm dealers or terrorists and a perfect way to launder money and to evade tax authorities, and you have the perfect formula for not even wanting to hear about it.
In addition, you still have ICOs (Initial Coin Offerings), basically a fundraising in which investors receive tokens (any asset or utility which is tradeable, which in this case are usually the coins themselves) to redeem a service offered by the firm; the problem is that many times that service is either useless or even valueless and the investors leave the process empty-handed. Yes, it is true that many have been proven as fraudulent, ripping away people’s money from day to night.
But there is a thing which is way above all of this: it is called human nature. Being with digital coins, with real money, with your car, with your house or with anything else toward which money can be exchanged, then you have the chance of running into a scam or fraud. Remember when in the last decade when everyone was buying valuable financial products (based also on fake high ratings), just because the main banks could not be simply cheating people? Well it seems that they were, showing that in the end you must be careful, even when you move your pinkie.
So regarding cryptocurrencies, there are lots of projects which simply do not matter, but there are also the ones which are credible and fair, based on companies whose projects are here to add value to a market which seemed totally saturated (and flawed) until this digital money started to appear.
“They are very volatile”
Yes they are but guess what? If you stop being hypocrite for a minute and really think about it, that it is indeed a great thing! Where in today’s world can you find an investment where you can gain 30% in one single day (of course that you can also lose 20%, but that is part of the game)? Investors have been looking for years for this and do not tell me they are investing in bonds, gold and shares just because they really believe on the projects or companies behind it. Hell no! They are doing it because they want to earn money, just like you and me, so they are now moving it to digital since it is much more appealing than the traditional markets.
So instead of singing the same tune as most of the people, think about turning this volatility for your own good. There are, of course, already many thirsty people running after this supposedly easy money but that should not hold you for getting in. Indeed, and contrary to what most do – which is investing money when the buzz is high and running away and selling everything when the market drops – just remain calm and never get emotional. Instead of just seeing the obvious and the short-term, understand that even with its dips, this digital market has been always going up. Do not believe me? Well, three pictures are worth three thousand words (in this case I am going to show the evolution of the three most important cryptocurrencies nowadays – Bitcoin, Ethereum and Ripple – in the last two years):
After the three crashes which happened in December, two weeks ago and on last Friday (most likely due to the words of the India’s Finance Minister that “the Government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system”) the usual haters came and started razing cryptocurrencies as worthless, a scam which will drag you down and make you lose all your money. Yes, it is true that the situation seems far for good and it can scare away even the most crypto avid believers. But as you can see by the charts above, wherever they tell you, the numbers never lie. Math is a universal science for a reason and if there is something which these graphs can show is that, even with all the dips and tumbles, cryptocurrencies have had a growing trend, no matter what bans, govermentnal measures or general panic show up along the way. So it seems that within the “chaos” (aka volatility) there is some kind of “order” (aka consistent growing) which you can truly rely on.
Ok Andreas, you have convinced me but, with so many cryptocurrencies nowadays, in which one(s) should I invest?
That my friend, it is the core of the matter, not whether you believe in crpytocurrencies. After a year of 2017 in which Bitcoin was the king (due to its popularity and general acceptance, as it was the first digital coin with the right technology to match the demand of high volumes), this 2018 has shown us already that the investors and normal people are already looking at all the other Altcoins, since everyone is trying to find the “next big thing”. Even if Bitcoin will keep its high value and price (attention that one concept may not have nothing to do with the other), there will be many alternative coins which might jump to the spotlight, maybe because they are faster, have lower or no rates, have a better technology or simply because investors will speculate about them.
So in this case I recommend you to do your own research and to find out which one(s) is better for you or which one your gut tells you that will explode throughout 2018 or in the next years. Because let us face it: no one really knows what is going to happen, so in the end it is almost a leap of faith (or call it gambling, if you do not want to take it to an “existential” matter) the cryptocurrency will you invest in.
Look, I am going to be honest with you: I do not believe that much in the future of the cryptocurrency. I am neither one of these puritans/purists – who keeps bringing the concept of digital coins – nor someone against the “establishment”, who wants to see the central power and banks falling. Yes, somewhere in time the Bitcoin or any other alternative coin will either reach a state of equilibrium or simply burst. If we look at it, it is still totally dependent on fiat currencies and actually it can become worthless all of a sudden, if a series of circumstances happen (as the ones we have seen lately).
Basically, I simply look at cryptocurrencies as a way to earn money. If then, in a near future or even in the long run it becomes the norm and offers more freedom and convenience to people, then better.
Innovation is always scary, especially when it changes something which we see as an undisputable fact (exchanging money, issued by governments and distributed through banks). But the same happened when they called Graham Bell a lunatic for “trying to give voice to a telegraph” or when the internet was seen a tool just for university nerds, so the future will tell whether your “money invested in a stupid way” will not indeed become a genius investment.
But whatever you do, just remember to invest only money you can lose, because you never know what may happen in a five years time: either you and I will be rich and claiming to everyone “see, what did I tell you before? You did not listen to me and now I am the one who laughs” or we will just avoid this topic like the plague, in case this digital money becomes one of the biggest failures of the modern times.