Venezuela recently announced plans to launch a cryptocurrency in order to avoid U.S.-led sanctions. If you think that only communist South American countries are paving the future of global currency, you should look at America this year. Americans are rushing to buy cryptocurrency as they lead the way in purchasing Bitcoin, pushing its worth to new heights.
Bitcoin is a cryptocurrency relying on a distributed ledger, blockchain. This means everyone has access to the ledger, and in order to “own” a bitcoin, you must know a long, complicated number. It was released in 2009 by Satoshi Nakamoto, an anonymous alias for the one or more people who designed Bitcoin.
Bitcoin is found through “mining” for the numbers or through companies that mine for the Bitcoin and then offer it to the public through online websites or A.T.M. machines.
At the end of December 2014, one Bitcoin was worth about $350 average according to CoinDesk.com. Since December 2014, it has grown 3,360% to the current price of $11,761 (12.5.2017). January of this year it was worth a little less than $2,000!
With such a meteoric rise, the question is whether or not Bitcoin is a worthwhile investment, or will be a major crash in the near future? Chicago Board Options Exchange (C.B.O.E.) and Chicago Mercantile Exchange (C.M.E.) markets announced they will begin trading Bitcoin futures, but the New York Stock Exchange (N.Y.S.E.) is not sold on its success.
Futures are an agreement to buy or sell an asset at a future date at an agreed-upon price.
At a financial conference, Intercontinental Exchange Inc. Chairman and Chief Executive Jeffrey Sprecher said, “We may be stupid for not being first on that.” He cited worries that Bitcoin is filled with buyers and not sellers, and by betting on Bitcoin to short sell might be a foolish idea. Bitcoin does have a history of being very volatile though. According to Boston University business professor Mark Williams, in 2014 alone, Bitcoin had volatility that was eight times greater than the S&P 500 and 18 times greater than the U.S. dollar.
With big markets adding futures to Bitcoin, the cryptocurrency may gain something they have never possessed before: regulation. Many people flocked to Bitcoin because of the fact it was unregulated by any government. That is why Venezuela is launching one in order to escape sanctions. With possible government regulation on the horizon, Bitcoin may not have the same appeal that it had since its start for almost a decade.
For this reason, it is not suggested that someone invests large amounts of money into Bitcoin even though it may look attractive from the price rise alone.
With a history of immense volatility and lack of regulation, it would be a very risky venture. Instead, with the historic rise of the stock market this year and the upcoming corporate tax deductions in Congress’ tax bill, investing in safer mutual funds would be the smartest and safest decision for the future.
Investing in stock market businesses that are making a profit and paying out dividends is a smarter decision than betting on cryptocurrency to keep beating the U.S. dollar.