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Are Cryptocurrencies a currency or an asset?
With the recent excitement around cryptocurrencies- surging its price at an alarming rate, many investors and financial pundits have been convinced about cryptocurrencies volatility. Hence announced it’s inability to label itself as a ‘currency’.
Although the advantage of using cryptocurrencies knows no bounds, considering the hassle-free exchange of it and the elimination of recurring chores done for the middleman; cryptocurrencies still can’t be deemed as a currency instead it can be viewed as a ‘financial asset’. The discussion below will highlight some of the points which can be taken as supporting details for the statement.
The most crucial point in making cryptocurrencies appear as ‘assets’ would be- the rapid change of its value. The wild swings of the rates make it unstable to transfer among partners, which is obviously not a characteristic of any currency worldwide. According to Kevin O’Leary an investor and “Shark Tank” star, ‘The fact is, it is so unstable- volatility in both directions, it’s up and it’s down- that nobody in a substantive transaction will take that risk’. O’Leary further adds, ‘So it is a long way from being a currency.’
When it comes to the legality of such cryptocurrencies, it has been observed that all of these currencies do not fit any bank’s legal definition of currency. Furthermore, the critical design of it and the technology involved makes it almost impossible for authorities to impose regulations on the exchange procedure or to stop any kind of risk. The statement can be verified through an assessment done by the Bank of Israel which has formed an internal team to look into the risks involved in cryptocurrencies such as Bitcoin. One of them being- the difficulty in issuing certain guidelines to manage or monitor the risks in cryptocurrency related activities; which proves this digital currency to fall under an ‘asset’ instead of ‘currency’.
Where will cryptocurrencies go from here?
Cryptocurrency- definitely one of the most trending topics of 2017 and is showing no slowdowns this year as well, despite a few hiccups. At the time of writing, two of the most famous cryptocurrencies Bitcoin and Ethereum are valued at $8270 and $832.31 respectively, showing that their values are falling. However, many experts have varied opinions regarding the future of cryptocurrency- from being quite positive about it to be wary about a future with cryptocurrency and its supporting technology.
Despite the fact that cryptocurrency did not perform as well as expected at the beginning of this year, it is more than likely to stay permanently, says Robert Herjavec- a Shark Tank investor and cyber security professional. He believes that a form of cryptocurrency will exist within a few decades, for which we will have to pay by electronic means, with the notion of cash finally becoming outdated one day (Ayers, 2018).
However, Robert himself is not completely sold on it, the main reason being that cryptocurrency’s value can fall down to zero, due to its volatile nature. Another reason he states that as it is mostly untraceable, it is an ideal choice for hackers (Francis, 2018).
GateCoin Exchange’s Head of APAC Business Development, Thomas Glucksmann thinks that cryptocurrency, specifically Bitcoin, could reach an entirely new level of success with its value reaching up to $50000 by December, provided that it gains regulatory recognition along with technological upgrades like the Lightning Network which aims to lower Bitcoin’s transaction fees as well as providing instantaneous transactions (Janus, 2018).
Jamie Burke, CEO of Outlier Ventures feels that following February the market might probably reach a staggering trillion dollar mark, even though he adds that as the market becomes stable afterward, it may reposition to its former self.
Thus cryptocurrency is not showing any signs of a slowdown in the near future, and if the opinions of experts are to be believed, it is here to stay for a long time. Only time will tell how this holds up- whether the detractors are right or its supporters. One thing is for certain though- the discussion about cryptocurrency, its merits and disadvantages is not going away anytime soon.
Future of cryptocurrency
The public will decide on the future of Cryptocurrency, says governor Muhammad Ibrahim of Bank Negara, the central bank of Malaysia.
By the transparency of cryptocurrency promoters, the public can decide on its own if they want to invest in cryptocurrencies. he said.
He states that the central bank would not recognize cryptocurrency as fiat money (prices fixed by government). They would also not ban cryptocurrency either but leave it to the market to decide on the fate of cryptocurrency.
Finance Minister II Johari Abdul Ghani had said Malaysia would not completely ban transaction on cryptocurrency as such move would “curb creativity and innovation in the financial sector.
Reference: http://www.nationmultimedia.com/detail/Startup and IT/30338554
If you make a simple mistake in the transaction, it might cost you huge. As well as the fact that one’s digital fortune can be erased by a computer crash, or that a virtual vault may be ransacked by a hacker. These disadvantages may be overcome in time through technological advances.
If you are considering investing in cryptocurrencies, it may be best to treat your “investment” in the same way you would treat any other highly speculative action. In other words, recognize that you run the risk of losing most of your investment, even maybe all of it.
So to Sum-up:
Supporters point to its limited supply and growing usage as value drivers, on the other hand detractors see it as just another speculative bubble. If you cannot stomach that kind of volatility, you should look for investing elsewhere that are better suited to you.
Janus, E. (2018, February 7). The Future’s Looking Bright For Bitcoin: Experts Predict $50K For 2018. Retrieved from Bitcoinist : http://bitcoinist.com/futures-bright-experts-predict-50k-2018/
Ayers, M. (2018, February 8). Money. Retrieved from Time: http://time.com/money/5137464/shark-tank-investor-robert-herjavec-has-a-bold-prediction-for-the-future-of-cryptocurrency/
Francis, J. (2018, February 9). SHARK TANK’S ROBERT HERJAVEC: ‘CRYPTOCURRENCY IS THE FUTURE’. Retrieved from Bitcoinist: http://bitcoinist.com/shark-tanks-robert-herjavec-cryptocurrency-is-the-future/
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