Crypto Currency: Rise and Rise, Will it?

Bishwas Bhattarai, Senior Lending Manager
M. Comm. (Banking & Finance) UNSW, Dip. Fin. Plan.

11 October 2017
Make sure to have strong stomach to digest. Investing on speculation is unlike the fundamental investments like your house or shares market. This is very early days of Cryptocurrency and a lot of history still needs to be written. Don’t invest if you are not prepared to lose.

Let me start by saying, I am not against the Crypto Currency. However, it is not my cup of tea and I would not be investing in Crypto-Currency as well.

There is no surprise as because of the surge in Crypto currency –especially Bitcoin more people are flocking in cash in and earn. Questions, needs to be asked if this is speculation only or if most are investing in fundamentals. And, is it only the rise or will there be a fall in horizon?

Unlike, any other assets class Crypto is dynamic, and very volatile. Only, last month’s news from Chinese regulators announcing ban on initial coin offering has led the bloodbath and free fall on Crypto-market.

As per definition, in short Crypto Currency is digital asset invented to work as medium of exchange to secure the transaction. So in short it is just a medium for transaction however, there is no underlying sovereign or company guarantee rather is priced based on market economy controlled by supply and demand. And it does not have underlying assets like shares or commodities; it is just a financial instrument. First Crypto to ever develop was Bitcoin, and is estimated over 1000 crypto currently circulates around the globe with different niches. Bitcoin runs on block-chain, and is decentralised ledger run by “miners” by their powerful computers and hence they are rewarded in bitcoins.

Bitcoin, is no doubt the most popular of Crypto currently as of 08/09/2017 each is trading at A$5743 and is estimated there are approximately 16.5 million bit coins in circulation on March 2017. As of 08th September total Bitcoin Capitalisation is over US$76 Billion and whole Crypto is just over US $164 Billion.

Biggest benefit of using the Crypto would have to be the level of anonymity they offer to buyer. And, also the trade cannot be faked and reversed due to the complexity of Crypto to generate and or replicate. Because, of this Crypto always has been linked to dark web this is not to say Crypto is not used in normal life.

What you need to consider, prior to investing in Crypto

Get the Facts Not the Myth

Firstly, the surge of Bitcoin may be is too fast too quick but has been in existence since 2009. The maximum number of Bitcoin that can be mined is 20999999.9769 so just under 21 million. Currently we are almost to 17 million in circulation. It is widely believed that this number will be saturated and there will be shortage of Bitcoin. Let, me make this clear the last of the Bitcoin is designed to be mined till 2140 that still gives us over 123 years from now.

Know the product

First, do the plenty of research why and how. You need to understand the fundamentals and scope. The price is set with demand and supply and the market is very wide open. Especially, with Ethereum, acceptance of Ripple by 4 Global banks, and rise of Monero, Competition is likely to intensity in coming years. So, it comes down to selecting the right mix in right time rather than just investing on Bitcoin and cashing on it as most investor are doing. It requires a lot of discipline and market study.

Sovereign Risk

There are still lot of countries, which would not allow the legal trade of Crypto, however in recent times we have seen this getting more relaxed. The legislative and legal changes could influence your investment returns. Only last week Chinese regulator has announced the restriction to raise fund using initial coin offering (ICO). ICO allows raising the fund for start-up by selling Crypto in return for cash. However, just want to note this was only temporary ban from regulators in process of sorting illegal ICO. Then again, China has known to develop their own Crypto Currency prototype last March and tested so speculation is they may be in process rather to legalise in controlled environment.

It is believed currently there are 1000 of ICO issued in China for different Crypto and it has caused nightmare to regulate or monitor the authenticity for each Crypto.

Be able to Digest

Make sure to have strong stomach to digest. Invest on speculation this is not the fundamental investment like your house or shares market. This is very early days of Cryptocurrency and a lot of history still needs to be written. Don’t invest if you are not prepared to lose. Some of the lower value currency provides the higher return. For example last September 8th at Peak Monroe (XMR) was trading at US$128.18 just after a week on 15th September it was trading at US$75.54 which is 41% change in price within a week and still is US$86.50 never recovered that peak.  However, be mindful since this is a small market arbitrage is very possible.

Why I believe Crypto will thrive

It is only early days. And it is estimated by 2030 total Crypto market capitalisation will soar to 300 billion. I believe it will be much more than that. Currently, given Crypto is not even accepted by most markets and only being used mostly for dark web or investing reasons. This number could grow much more think during 90’s and evolution of dot com (.com) business and where is it now.

I remember the stories being told when internet came along, and the rise of dot coms. Hundreds on pundits had forecasted the dooms day. Now it has become one of the first profitable industries of our generations. Even, during 2009 then 2014 many have predicted Bitcoin will die including the Wall Street Journal and Washington Post. At present each Bitcoin in trading higher than an ounce of gold. This is not to say Bitcoin will thrive but Crypto in general. On recently I read the report from Standpoint founder Ronnie Maos who predicted the Bitcoin to surge to US $7500 needless to say many others have predicted to fall to nothing as well.

As time goes, we are likely to see more acceptance of Crypto currency in everyday use. Most user finds Crypto more beneficial while dealing with foreign currency purchase, avoiding the transactional cost compared to using plastic. Only last month there has been a real estate purchase in Texas and transaction was done fully via Bitcoin, not to mention the Crypto was then changed to local currency. This year another real estate transaction was done by Crypto currency in Scotland; however the amount was for lesser value.

Amazon, Apple’s App Store, Microsoft, Google, IBM, Tesla, Virgin Galactic, Target, Bloomberg are among thousands retailer who are already accepting Cryptocurrency. As it is Kiley more are going to follow the suit as time goes.

In summary it my seems lucrative the Crypto Marker is highly unregulated, there are a lot of issues with legality, highly volatile, its neither commodity or currency rather a medium. If you don’t understand don’t invest.



*The purpose of the post is only General Advise and not to provide any type of financial advice and is not prepared in respect to your personal circumstances, objectives and needs. Before considering any investment decision, you should consider your personal objectives, circumstances and needs. And legal and financial advice may be required prior to acting in any decision.