Imagine getting a chance to relive the early internet days of the mid-90s with an understanding of all that it could become. That’s potentially where we currently are with cryptocurrency. While the old guard resists, there are generations of people learning and seeing all that blockchain and crypto can be. In fact, if you take a look at the technology adoption curve, crypto is outpacing the internet (1992-2006).
Let’s start with blockchain. Blockchain is the technology that allows for the existence of cryptocurrency, and it is already revolutionizing the world. Think greater digital speed of information, capacity, safety and in the case of crypto, similar to a running receipt of every transaction that takes place.
Cryptocurrency is a digital medium of exchange using an online ledger with strong cryptography to secure online transactions. Cryptocurrency coins/tokens have many uses including as a store of value, as a form of payment, enabling the transfer of money and so on. There are currently over 12,000 cryptocurrencies and many are already proving use case. Banks, which shunned crypto for years are now interested as they realize the potential this technology holds, and their investors push them for options.
The first crypto movers who were granted a regulatory “pass” were Bitcoin (BTC) and Ethereum. Think of BTC as a store of value like gold. There is a finite amount of BTC which is “mined” across the world (using computers to solve cryptographic equations) and it continues to gain in popularity, with countries looking to switch to it as a currency. BTC should be a good long-term investment but might not have quite the upcoming gains others are about to have. BTC reached $69,000 a few weeks ago, up from a cycle low of under $4,000 in March 2020.
Ethereum can be viewed as a network that allows for many different actions and has its own coin called ETH. ETH has many uses, but it has really taken off in the NFT world. If you buy ETH, it is the ETH coin you are buying.
Right now, NFTs are thought of as digital art, but in the future, the tokenization of anything is possible. Each token will be assigned a value and people will be able to invest in almost anything as smart contracts allow for you to earn money on an investment. Crypto also has the potential to reach billions who are unbanked.
If you want to own your own cryptocurrency, you can buy it on an exchange like Coinbase or Uphold. You can also choose from a limited number of assets on PayPal and Robinhood, but you’ll own “paper,” not the actual crypto assets, and it can be difficult to sell if things are heated.
98% of cryptocurrencies may fail but there’s also a chance to find the next Google/Amazon. Crypto IRAs are available and Decentralized Finance (DeFi), the ability to let your assets earn money for you, could greatly damage banks, so there will be a rocky few years of regulation volatility.
Things to remember:
The crypto market is extremely volatile…at least for a few cycles longer.
There is money to be made. A LOT of money. Pay attention to crypto in the news these next few months and prepare for the probable bear market to come in the next few years.
As of now the market rises and falls based on BTC, but its dominance continues to fall.
Do your own research and choose assets that excite you, especially ones with use cases like XRP or an Ethereum competitor like Cardano (ADA). Nasdaq.com: 2 Top Cryptocurrencies to Buy for the Long Haul
Risks not only include financial but regulatory as well. Do not invest in this market without the proper advice.
A 1975 graduate of the Wharton School at the University of Pennsylvania, Harvey enjoyed a 20+ year career in commercial banking, exercising his “golden parachute” in 1996. In his volunteer life, he is a past chair of the Small Business Banking Unit of the American Bankers Association, Easter Seal Society of New Jersey, the SAAGNY Foundation, PPAF EXPO, and Supplier Committee of PPAI. He is also a past President of PPAF. PPAI awarded him the H. Ted Olson Humanitarian Award in 2013.