This is a guest post from Ben Hamlin. Ben is an aspiring financial entrepreneur and avid investor who became interested in learning to earn money at an early age. Ben ultimately hopes to become financially independent through his various investments. Bitcoin and similar cryptocurrencies are getting a lot of attention lately, and with Japan recently granting them legitimacy, bitcoin’s value is sky-rocketing. This is an interesting post for investors to keep an eye on an emerging asset class.
Cryptocurrency is easy for a lot of us to shrug off. We don’t need it in day-to-day life and probably won’t anytime soon so it can seem unnecessary. But there are millions of people around the world who see a great deal of value in this form of money, and that means it’s worth a closer look.
For those who aren’t particularly familiar with the term, cryptocurrency refers to digital money that can be acquired, stored, and traded in an entirely non-physical form. The advantages include the ease and security of storage, the anonymity of transactions, and the ability to handle money without fees or hold-ups from banks. For a lot of people, the interesting thing about cryptocurrency is that it represents a brand new resource that, when treated like a commodity, can make for a profitable investment.
Back in 2014, Forbes cited experts suggesting that the proper way to think about Bitcoin was as a commodity, and a year later the US Commodity Futures Trading Commission (CFTC) ruled that Bitcoin ought to be classified as such in the U.S. This means that it’s been recommended people treat Bitcoin, and by extension other cryptocurrencies, not like the dollar or euro, but like gold or oil. It’s something to be acquired (if you believe it’s strategically smart to do so) and stored, and eventually sold for profit. Knowing how to think of cryptocurrency is one thing, but a bigger question is whether it should also be an investment that you need to pay attention to.
That’s up to each individual to decide, but there are some reasons that these emerging resources should probably be on people’s radar.
The first is that cryptocurrencies are performing extraordinarily well. Any good investor recognizes that past success is not necessarily indicative of future performance, and that’s also important to keep in mind here. But with regard to Bitcoin the strength of this market is undeniable. Bitcoin has been flirting with approaching a $3000 value, and recently hit an all-time high, which seems to be happening every few weeks in 2017. Other cryptocurrencies (sometimes referred to as Altcoins) operate at far lower values, but have also shown strength in the last year or so. Bitcoin is the big fish, but the whole market is worth looking into.
Another factor to consider is that more large-scale industries are embracing cryptocurrencies for those who want to use it for regular transactions. In recent years we’ve seen more online retailers and brick-and-mortar businesses getting on board. Most recently, we’ve seen the UK’s online gaming industry take the first steps toward allowing Bitcoin payments, which should open the door to massive usage in the future. Every time a domino like this falls, it means more people making purchases with digital currency. This creates more demand for the currency, which in turn inflates its value.
We’ve also seen some of the countries that had held Bitcoin and other cryptocurrencies back now easing their positions on the subject. Japan is the most noteworthy example, signifying a large economy in which Bitcoin usage was restricted and is now allowed. The more this continues to happen in large countries or those with economically active populations, the more demand we’ll continue to see.
None of these factors mean that cryptocurrency is necessarily a wise investment. But they do all mean that it should be taken seriously. This is something all modern investors should be starting to study and consider moving forward.