News on cryptocurrencies

24.11.2018   |  Capital Market

In spite – or maybe because – of this year’s devaluation, cryptocurrencies, or the alternative currencies of the Bitcoin or Ethereum class are seen by the specialists as an investment opportunity. However, be cautious! The high volatility of these investments makes me recommend some prudence in this respect. 

  • Bitcoin continues to decrease. On 22 November, when I wrote this article, the exchange rate (if we may use this term for cryptocurrencies) was of about $4,500. This means that, roughly speaking, Bitcoin has lost all the ground gained up to 2017. This could be a good time to buy, but I, myself, haven’t bought any. First of all, because I do not see myself an expert in speculative earnings and, secondly, I believe in thoroughly built things.
  • Ethereum is slightly increasing. The second best known currency exceeded, also on 22 November, 133 dollars, after a historical minimum value of $125.6. This is a slight increase in a long time. If this trend continues over the following months or years, we may be able to speak of a start of stabilization on the cryptocurrency market, after what I believe to have been an initial bubble. For the time being, however, we do not have solid grounds to be optimistic.
  • Forbes said in an article that the alternative coins are “in a transition from a bad idea to an actual scam”. Whether such a pessimistic view will take shape in the future remains to be seen. The technology behind cryptocurrencies is still a valid and revolutionary idea. The history of mankind has seen that atomic fission has led to both bombs and nuclear power plants. We should keep an eye on the Blockchain.
  • Also read this article from Bloomberg on the investigation carried out by the American Justice Department in respect of the cryptocurrencies price manipulation. Spoiler: is has to do with traders and not with the currency itself.
  • To conclude on an optimistic tone, it is also Forbes that says that alternative currencies would be great if the money holders understood the technology. Let’s think a bit about countries like Somalia and China: the money could reach the relatives of those who had left their countries to work abroad and this without the substantial commissions charged by banks or Western Union. I for one am very curious how many if any of the Romanians working abroad use such a solution.

I have purposely looked through contradictory information, just to give you an indication of the complexity of the cryptocurrency market. This article does not aim at discouraging you to invest in such difficult assets, but it is a starting point towards a type of financial education that schools, even those of higher education, provide neither in Romania, nor in other countries. Find the answers to your questions online, as we are living in times when information is (quasi-)free and it produces value.

Octavian Pătrașcu  |   24.11.2018   |  Capital Market

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