It’s One for the Money

8th of September, 2017

For every Boom there is a Crash. History tells us that the higher prices fly, the greater the crash will be. Its inevitable, isn’t it?

The more emotional investing becomes the more irrational the pricing. There is an old saying that when “Taxi drivers start recommending stocks it is time to sell”

Welcome the new world of Cryptocurrencies, with BitCoin the biggest and boldest of them all.

Bitcoin invented by an unknow person or persons, calling themselves Satoshi Nakamoto, is an open-source currency and digital payment system.

It is a Peer-to-Peer network with transactions taking place directly without an intermediary like a Bank, PayPal or Western Union. Transactions are recorded in a publicly distributed ledger called blockchain.

According to Jon Peddie of Jon Peddie Research

“People are sending Bitcoins to each other over the Bitcoin network all the time, but unless someone keeps a record of all these transactions, no one would be able to keep track of who had paid what? The Bitcoin network deals with this by collecting all the transactions made during a set period into a list, called a block. It’s the miner’s job to confirm those transactions, and write them into a general ledger. They are paid for this work in like currency.”

These public ledgers are validated by 1,000’s of Bitcoin miners and mining pools who as well as mining Bitcoins also validate the blockchain ensuring it is safe, stability and secure.

I’d suggest you watch this short video (1.55mins) for a quick explanation of mining Bitcoins.

According to a 2017 Cambridge University research report there are 2.9 to 5.8 million unique users with a cryptocurrency wallet – most of them containing Bitcoins.

Bitcoin is not the only Cryptocurrency, there are plenty around – but it is the biggest. The New York Times stated recently that the combined value of both Bitcoin and Ether (another cryptocurrency) is greater than PayPal and nearly as much as Goldman Sachs!

It sounds exciting doesn’t it?

This new industry is not only set to have an enormous impact on the financial sector (AKA produce you know what, that will manifest you know where!) it is also driving other industries of the technology world.

You see its said that bitcoin miners have 13,000 times more combined number-crunching power than the world’s 500 biggest supercomputers. All these computers swinging their picks and shovelling their shovels as quick as they can in the race to unlock more Bitcoins.

This demand for computing grunt has been a boon for the hardware manufacturers (GPU Market) especially for such vendors such as Advanced Micro Devices (AMD) who have seen prices spike with a shortage of chips to go around. Regardless of the effectiveness of Bitcoin and blockchain alike, all of the associated technology gains will lead to improved productivity for all workers.

However, in the short term, the enthusiasm for Cryptocurrencies is most likely going to increase. Like any good boom it has to get past the ‘Euphoric’ stage into the delusional ‘This Time its Different’ stage. It doesn’t take too much imagination to envisage the logic that will be used to justify the future world changing benefits of this amazing new crypto world.

But mark my words it will end and there will be tears!

So in 2019 when your driverless UBER advises you in its best robotic voice to invest in cryptocurrencies it will sound the bell. But you can’t say you have not been warned that the ‘CRYPTOcurrencies’ will likely turn into ‘CRAPcurrencies’…..

Let’s get started

If you want to avoid the mistakes of not understanding the dangers of investing without an understanding of the Economic Cycle, then why not have a chat to us about how we can help?

You have nothing to lose except a few minutes of your time and everything to gain.

So… let’s get started.

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