For Starters, let’s define Cryptocurrency: Cryptocurrency is a method of securely storing value online that can be traded between two parties, using blockchain technology, thereby making it a reliable and secure method.
There are many Cryptocurrencies of late; some sources say there are about 6,700 cryptocurrencies with an estimated overall value of more than $900 billion – Bitcoin being the most famous cryptocurrency to date. Bitcoin comprises the bulk of cryptocurrency value, an enormous segment estimating around $560 billion of the $900 billion of cryptocurrencies, followed by Ethereum at around $140 billion, trailed by Tether, Polkadot, XRP and countless more to date.
One of the questions facing crypto today, is how can it be treated as a currency being versatile in nature and far from being volatile? Stability as we know, to be a currency’s strongpoint. Most people tend to treat cryptocurrencies as stocks, betting on them, gaining value to sell again and make a profit. This happens with other regular currencies but not to this extent.
What are the bases and risks related to crypto gaining or losing its value? Well, the stock market depends on various signals that causes stock to either skyrocket or plummet. A few of these indicators are Earnings per Share (EPS), Price to Earnings Ratio, and Dividend Yield, all of which do not apply to crypto. These indicators; however, do not apply to crypto making, as entering the crypto market is a very risky action or investment – depending on how it is being used.
We have heard that when the risk is high, the return is always higher. This is currently happening right now with Bitcoin hitting an all-time high of around US $49,000.
Now, for what you’ve all been waiting to hear, is it the time to hop on to the crypto train or is it too late? Expert opinions vary depending on the situation; some project that all this is just a temporary bubble that will inevitably burst, others forecast that crypto is the future given its potential to be a global currency, eliminating government control and exchange rate issues. Cryptocurrency might become the future of currencies as it helps the world head towards decentralization and globalization, inasmuch aligning with the trend for the last 20 years. If that were to happen, it comes at a price.
One of the cryptocurrencies advantages is that it helps with illegal transactions, easing the way for illicit trade, drug trade, child trafficking and countless dire fraudulent situations. Important to note is that the nature of crypto depends on the security of the transaction and that any two parties can both be anonymous.
Cryptocurrencies use blockchain technology, which make them very complicated to retrace and secure making it very hard to track such transactions. Also, the media plays a large role in ‘hyping up’ people so to speak, to invest in crypto when they literally know next to nothing regarding the issue. Highly regarded celebrity giants like Elon Musk can tweet about a certain currency and immediately influence a 30% increase in the value of cryptocurrency overnight. This makes such an investment intimidating and threatening for people to use it as a regular currency in exchange for goods and services on a daily basis, particularly with no back-track system.
Regulatory systems should adapt to the new “elephant in the room” and try to put base lines to guide the use of cryptocurrencies. For example, Anti-Money Laundering and Know Your Customer banking laws would need to be adapted to cryptocurrency in order to cope with this market transition paving the way for new users to feel safer entering this new world. I would personally invest in crypto right now given that it is being used as a fast-track profit mechanism rather than as a currency.
Still, if you ask me, I would not put a substantial amount in crypto given the high risks I cannot afford to currently take with such a move. In the end, it would all depend on how one views crypto.
A new global currency? Or an easy way to make fast profits?
Written By Mohamed Sharaf Aldine
Post a Comment