Intro to Cryptocurrency

by Grace Burns

What is cryptocurrency? As we move into what’s known as the Digital Age amidst the Coronavirus pandemic in areas of healthcare, education, and even our social interactions, it is crucial to examine the industry ahead of the curve in digitization: Financial Technology, or “FinTech”. As of 2009, the Fintech industry introduced Cryptocurrency, a digital form of currency secured by cryptography, making it difficult to be counterfeited or stolen. Cryptocurrency was made popular by the specific currency Bitcoin. Cryptocurrency is exchanged in a different manner than regular cash or trades in the stock market. Instead, it is Mined, which is defined by Forbes as, “the process through which new Bitcoins are created and transactions are recorded and verified on the blockchain.” The blockchain is the data storing technology behind Bitcoin. It stores data in blocks that chained together in chronological order. It's most commonly used as a ledger of transactions but can store different kinds of information. As of January 4, 2021, one unit of Bitcoin is worth over $37,000 with a value that is projected to continue growing. The current projected value of Bitcoin is rooted in the idea of likening it to a commodity when investing, such as oil, gold, or coffee. The COVID pandemic has resulted in a significant projected monetary inflation. Many investors are looking to Bitcoin to preserve their assets. This monetary inflation can be defined as, “...the decline of purchasing power of a given currency over time.” Bitcoin was not always available to or accepted by, mainstream investors. First, Bitcoin was introduced on an online black market, the Silk Road. The Silk Road is an elusive entity that is characterized by noncompliant behavior with institutional rules, including selling drugs and other illegal goods. As recently as November 2020, $1 Billion of Bitcoin was being moved along the Silk Road, with no clear trace. It is an interesting paradox between its role as the crown jewel of the Silk Road, yet a virtual pariah in the traditional American Stock Market. Initially, Bitcoin was met with significant criticisms. It is a radical change to the norm of trading and was referred to by Warren Buffet as “rat poison squared”, in 2018. There are many valid criticisms of cryptocurrency, however. One is that the asset can drop and rise as much as 49% in a given 24 hour period, making it an extremely volatile investment. Additionally, there is a lack of acceptance of cryptocurrency by Older Americans, such as Warren Buffet himself. These Americans traditionally represent a substantial portion of the 1%. Without garnering the support, if not significant interest, of this demographic, it will be difficult for Bitcoin and cryptocurrency to move forward. When looking to invest, it is important to carefully consider all of your options. Bitcoin, while exciting, new age, and tech-savvy, comes with its equal share of criticisms. Do your homework before investing, take your time… and good luck! Sources: Frankenfield, Jake. “Cryptocurrency,” September 16, 2020. https://www.investopedia.com/terms/c/cryptocurrency.asp. Marr, B. (2017, December 06). A Short History Of Bitcoin And Crypto Currency Everyone Should Read. Retrieved December 27, 2020, from https://www.forbes.com/sites/bernardmarr/2017/12/06/a-short-history-of-bitcoin-and-crypto-currency-everyone-should-read/?sh=3bc4fc443f27 Fernando, J. (2020, November 18). Inflation Definition. Retrieved January 05, 2021, from https://www.investopedia.com/terms/i/inflation.asp Browne, R. (2020, November 05). $1 billion worth of bitcoin linked to Silk Road black market is on the move, analysis shows. Retrieved January 05, 2021, from https://www.cnbc.com/2020/11/04/1-billion-of-bitcoin-linked-to-silk-road-is-on-the-move-elliptic.html Tenebruso, J. (2021, January 05). The Smartest Investors Are Buying Bitcoin -- Here's Why. Retrieved January 05, 2021, from https://www.fool.com/investing/2021/01/05/the-smartest-investors-are-buying-bitcoin-heres-wh/