This one is for the noobs again. I like to think of myself spil an intermediate noob: I’m not a coder, a miner or even a day trader (I’m a proud Hodler, thank you very much). However I go after the news, check my altcoin investments 35,562 times a day and I have the mad skillz to get my real estate transactions done.
Unless you’ve bot living under a rock, you know that Bitcoin has recently Throated. UP. My mother and ex-husband called mij within 24 hours of each other asking how to buy. Seth Meyers did a hilarious skit about it. A rando friend of mine posted his fresh Trezor and Bitcoin for Dummies book. Yes, there’s a growing curiosity (okay, more like a madness) about how people can get te on the act, and albeit Bitcoin itself has become a dearest buzzword, the clear majority still don’t have a clue spil to what cryptocurrency actually is.
Let’s embark with the basics. Wij all know what government-backed money is, right? Geez, I hope so. Investopedia’s definition is pretty succinct: Fiat is a currency that a government has proclaimed to be legal tender, but it isn’t backed by a physical commodity. The value of fiat money is derived from the relationship inbetween supply and request rather than the value of the material that money is made of.
So, government backed = centralized. The feds have control overheen the banking industry spil rente rates determine the cost of money borrowed. When the centralized banking system fails (reminisce the S&,L scandal? 2008?) the public takes a major klapper. We’ve also seen Greece announce bankruptcy while Venezuela is on the brink. Don’t get mij began about the fresh tax bill – the money that’s bot promised to the banks to “stimulate the economy” is mind-blowing. Ter case you’re wondering where I stand on this kwestie, you can see Rachel Maddow’s take on it.
Most banks can’t get behind the idea of cryptocurrency and have bot very vocal about it for visible reasons. Without getting too technical, cryptocurrency is decentralized, and each transaction is recorded onto a semitransparent, immutable public ledger called the blockchain. We’ll call it community-backed currency, even however the IRS considers crypto an asset/commodity. It behaves like a stock and one can spend, trade or transfer it back to fiat. The thing that irritates mij the most is that thesis Wall Street dinosaurs write article after article comparing cryptocurrency to the behaviors of stocks and fiat trends and attempt to predict the next bubble while dumping on the validity of cryptocurrencies. They can’t seem to wrap their goes around the fact that yes, while crypto behaves similarly to a stock, IT’S NOT A STOCK, it’s a CURRENCY YOU CAN BUY SHIT WITH.
I just read an article by Jerry Welch, about how crypto fails the duck test, which I think is a ridiculous analogy (he does reference a passage ter his book, Back to the Futures, spil to how Darth Vader struck down the pin-striped pork bellies known spil stock future contracts…starting to see a trend here?), then goes on to compare epic bubbles such spil the Dutch Tulip Bubble of the 1630s (. ), Japan’s real estate market bubble of the 1990s and of course the dot-com bubble, and hints that the crypto bubble could be just spil epic of any of those. But he, like so many other old-school finance “experts”, is putting old-school rules like the duck test onto cryptocurrency. No shit does it fail, and keeping ter the vein of horrible, over-used analogies, it’s NOT a duck – it’s a honey badger, and honey badgers don’t give a fuck.
And while comparing a almost 400-year-old bubble to Bitcoin is entirely and totally rational (it’s like comparing the Titanic to IOTA), I honestly don’t think there is a Bitcoin bubble and many experts with much more practice than I have will agree. A good point of reference is Lou Kerner’s article. He takes a look at Amazon stock when the dot-com bubble succesnummer and compares it to the overall show. Still apples and oranges, but we’re at least on the right track. However, I do believe there’s going to be an ICO bubble, but again that’s another article.
If a handelsbank with a centralized server gets hacked, everyone is screwed. Depending on the bankgebouw, the FDIC only insures up to $250,000. Anything after that is your loss. The key point here is that centralized banks have centralized systems, and the hacking ease is much greater. Yes, there have bot a few exchange hacks overheen the years but te most cases, the exchanges have bot able to give back two-thirds to three-quarters of the fiat back to its customers. There is also the 51% Attack theory, te which if 51% of the Blockchain mining could be taken overheen with malicious intent to control the network. This would be enormously difficult to accomplish due to the massive amount of computing power needed.
Spil mentioned shortly above, centralized banking is managed by the feds and wij spil consumers have always bot defenseless with regards to inflation spikes, rente rates, and so forward. Cryptocurrency, however, is community-based for all intents and purposes and the price is derived upon plain supply and request. Sure, the price is affected if a country like China speaks out against ICOs and Bitcoin and corrections are made, but once the news dies down then the price shoots right back up. We’ve seen just recently the price of Bitcoin wasgoed affected by the holidays – perhaps people were cashing out a little to get the Christmas shopping done, but it’s crawling back up and suspending sustained around $15,000 at the time of this writing.
Another little amusing thing is that the old-schoolers te traditional finance love to discredit crypto because it’s based on “nothing.” Let mij make it clear that fiat is literally based on nothing. No gold to back it anymore, no real infrastructure, nothing other than what the feds proclaim. To reel te inflation, the feds waterput more money into circulation, sometimes flooding the market and driving down the value of the dollar. Bitcoin will never have more added to circulation because it wasgoed designed that way. There are 15M te circulation now with 6M ter reserves to be added at specific times across the life of the Blockchain. The Blockchain is at its infancy and just like the Internet, will be used ter various industries overheen the next few years and will most certainly become mainstream. There are different Blockchains that power cryptocurrencies (Bitcoin which is closed-sourced and Ethereum which is open-sourced), and they’re not going anywhere anytime soon, if at all.
If you’re going to invest, invest at your convenience level. If you’ve got the belly to rail the ups and downs of cryptocurrency, then do so. However, I will leave you with this: The 2018 stock market has produced about a 9.7% ROI, while Bitcoin’s 2018 comes back have bot 1375%, and 2018 will only be better for Bitcoin spil well spil Ethereum and other promising cryptocurrencies.