A cryptocurrency is a digital currency that is created and managed through using sophisticated encryption strategies known as cryptography. Cryptocurrency made the leap from being an scholastic concept to (virtual) truth with the creation of Bitcoin in 2009. While Bitcoin brought in a growing following in subsequent years, it caught substantial investor and media attention in April 2013 when it peaked at a record $266 per bitcoin after rising 10-fold in the preceding two months. Bitcoin sported a market price of over $2 billion at its peak, but a 50% plunge quickly afterwards stimulated a raging dispute about the future of cryptocurrencies in general and Bitcoin in particular.
Bitcoin is a decentralized currency that uses peer-to-peer technology, which allows all functions such as currency issuance, transaction processing and confirmation to be carried out collectively by the network. While this decentralization renders Bitcoin free from federal government manipulation or interference, the flipside is that there is no central authority to guarantee that things run efficiently or to back the value of a Bitcoin. Bitcoins are produced digitally through a “mining” process that requires effective computers to fix complex algorithms and crunch numbers. They are presently produced at the rate of 25 Bitcoins every 10 minutes and will be capped at 21 million, a level that is expected to be reached in 2140.
Some financial analysts forecast a big change in crypto is forthcoming as institutional money enters the marketplace. Moreover, there is the possibility that crypto will be floated on the Nasdaq, which would further add credibility to blockchain and its uses as an option to traditional currencies.
The future outlook for bitcoin is the topic of much dispute. While the monetary media is multiplied by so-called crypto-evangelists, Harvard University Professor of Economics and Public Policy Kenneth Rogoff recommends that the “overwhelming sentiment” among crypto supporters is that the total “market capitalisation of cryptocurrencies might take off over the next 5 years, rising to $5-10 [trillion]”.
While the variety of merchants who accept cryptocurrencies has progressively increased, they are still very much in the minority. For cryptocurrencies to end up being more extensively used, they have to first gain widespread acceptance amongst consumers. Nevertheless, their relative complexity compared to conventional currencies will likely prevent most people, except for the highly adept.
If you are thinking about investing in cryptocurrencies, it may be best to treat your “investment” in the same way you would treat any other highly speculative venture. In other words, recognize that you risk of losing the majority of your financial investment, if not all of it. As specified earlier, a cryptocurrency has no intrinsic value apart from what a purchaser is willing to pay for it at a moment. This makes it extremely susceptible to huge price swings, which in turn increases the danger of loss for an financier.
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