Did everyone else just get rich with cryptocurrencies?
Sometime around the start of the holidays, as pumpkin spiced lattes and dogs with sweaters captivated the nation, an even more powerful craze was taking hold. I didn’t notice it at first. My usual cable financial networks were dedicating more time talking about technology, servers, and “the cloud”. Then, quite suddenly, the strangest thing happened: people were earning tons of money, and it all had something to do with Cryptocurrency.
If you have never heard of Bitcoin, Cryptocurrency, or Blockchain, you are not alone. Cryptocurrencies, such as Bitcoin, are digital currencies that were developed by groups of software engineers after the financial crisis in 2008. With confidence in the economy at an all-time low, Bitcoin developers hoped to create a currency that did not rely on traditional financial institutions. Initially, cryptocurrencies didn’t develop the most positive reputation. Because of the anonymous nature of Bitcoin transactions, many saw cryptocurrencies as the financial platform of black markets.
However, come December 2017, it seemed everyone was making a fortune off of Bitcoin. From the start of the year Bitcoin had surged in value by more than 900%. Another cryptocurrency, Ethereum, had gained more than 5,700% and was continuing to surge. Given their growth, cryptocurrencies shed their reputation as a currency of criminals and gained a new reputation as an once-in-a-lifetime investment opportunity. By mid-December the fever pitch around Bitcoin had become so fierce that I started to see headlines like, “People are taking out mortgages to buy bitcoin” and, “Everyone is getting hilariously rich and you’re not”.
However, the truth about Bitcoin and cryptocurrency is much more complicated than these headlines reveal. At the same time that Bitcoin was experiencing record growth, governments around the world were deciding what actions to take to regulate this brand new currency. In the past few weeks alone, the South Korean government has moved to ban anonymous cryptocurrency trading. All of this uncertainty has led the value of Bitcoin and other cryptocurrencies to plummet nearly as quickly as they grew. Today Bitcoin hovers close to 50% of its peak value of $20k in December. The future of Bitcoin and cryptocurrency is uncertain, but these last two months have been a great example of why it’s important to do your research on investment opportunities, especially those with such a short lifespan.
To learn more about the inner workings of cryptocurrencies, check out this helpful guide from the Telegraph, and if you have any further questions, we at ELM3 are always happy to discuss investment opportunities.
