Virtual Currency: An unregulated digital currency that can be used as a substitute for real and legally recognized currency. Convertible Virtual Currency usually has a measurable value in real money, but what makes it convertible lies in its ability to be exchangeable. Not all virtual currency can be exchanged for legal tender though, therefore, not all virtual currency is convertible. Investopedia.com
“I think the internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing but that will soon be developed is a reliable e-cash,” Professor Milton Friedman in 1999.
Then in 2009, Bitcoin was born.
‘I can say almost with certainty that they will come to a bad ending’, says Warren Buffet, an American business magnate, investor, and philanthropist, referring to cryptocurrencies in January 2018.
John McAfee, Founder of McAfee however thinks “You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust. World governments will have to readjust”
“The Spanish government is reportedly preparing legislation that includes possible tax incentives to lure blockchain companies into the country”, whiles “…The Bank of Ghana is currently investing a lot of resources to further enhance the payments and settlements system, including digital forms of money and also to introduce cyber security guidelines to safeguard electronic and online financial transactions…”
In the mist of all these comments, how has Bitcoin as well as the ALTCOINS performed so far?
There are over 1400 coins trading/used alongside bitcoin, Bitcoin Cash (BCH) has grown by 339% since its Initial Coin Offering (ICO) in October 2017. Cardano(ADA) and Bitcoin(BTC) reached a little beyond 1000% while Litecoin(LTC) and Ethereum(ETH) returned 5,500% and 8,200% respectively. Ripple has single handled returned over 10,000% after rising from a cent to USD1.12.
The above mentioned coins represent the top 6 coins in the cryptocurrency market in terms of market capitalization as at January 2018.
However in the last two or three months, the market has gone through some difficult times.
Bitcoin dropped from about USD20,000 to its current levels. The other coins have gone through choppy trends with the whole market losing over USD400 Million; though the market have shown some signs of recovery recently.
“Volatility is quite common in the cryptocurrency world,” said Mati Greenspan, a Tel Aviv-based analyst at investment firm eToro, reports CNN Money.
The slump does, however, come amid a great deal of negative press also. The intervention of the United States Securities and Exchange Commission, the closure of Youbit, a South Korean bitcoin exchange after hackers stole 17 per cent of all assets amongst others have contributed to the performance.
It is reported that just 1,000 bitcoin holders are believed to own 40% of the entire market, and it has been claimed that they can cause its value to plummet or soar at any point, independent.co.uk reported in December 2017.
The head of the Bank for International Settlements (BIS) has blasted bitcoin as “a combination of a bubble, a Ponzi scheme” and, due to the energy consumption required for mining it, an “environmental disaster”
Other Ponzi schemes have also come to play. Normally they advertise investing funds in the crypto market, gold and oil but such schemes end up bolting with investors’ funds.
Ponzi Schemes: Clients are promised a large profit at little to no risk. Companies that engage in a Ponzi scheme focus all of their energy into attracting new clients to make investments. This new income is used to pay original investors their returns, marked as a profit from a legitimate transaction. Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart. www.investopedia.com
Investors opting to enter the crypto market or investing in Ponzi have in mind or should have in mind the level of risk being taken because the market is purely speculative and risky. I am not insinuating the crypto market is Ponzi.
The market has created a lot of millionaires and as well as paupers.
The experts sometimes get it wrong when projecting the performance on the coins because it doesn’t have any intrinsic value or guaranteed payout.
Bitcoin’s real value could be zero, James Faucette of Morgan Stanley is reported to have said in December 2017.
David Garrity, chief executive officer at GVA Research LLC warned Bitcoin’s price could drop as low as $5,000.
However, a “… lot more money is going to come into bitcoin, bitcoin will go up around $30,000-$35,000 this year – next couple of years? $100,000.” said Blockchain Capital partner Spencer Bogart: Captured from express.co.uk.
The Ghanaian Investor
The Bank of Ghana has warned that persons who decide to venture into this market do so at their own risk.
Indeed you are left to your own fate. You are your own banker, investment advisor, investment analyst and research analyst. You control your account. There is nobody to call to find out why your investment is plummeting why your investment is not growing, why your funds are not reflecting in your account, it’s an online business and you manage your own affairs.
Mobile networks, some banks and various online platforms provide avenues of entry and also to make withdrawals, making many Ghanaians beneficiaries of the positive movements as well as the downside.
It is important that investors take expertise advice (which may not be based on tangibles) before they hop into the crypto market. The market is full of sweetness and pain, therefore a place for aggressive risk takers only.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky, and this write-up is not a recommendation by the writer to invest in cryptocurrencies. The writer makes no representations or warranties as to the accuracy or timeliness of the information contained herein. At the time of writing this article, the writer owns a few portions of some coins on the crypto market.
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Author : Kofi Busia Kyei, Analyst