Digital currencies that are produced and overseen by cutting-edge encryption systems are known as cryptocurrencies. Until relatively recently the idea remained somewhat theoretical, but in 2009 the establishment of Bitcoin made cryptocurrencies a more popular commodity. In late 2017 the entire cryptocurrency market went stratospheric, with across the board increases that were no doubt spurred on by some heavyweight support. Shinhan Bank, the second largest in South Korea is testing a Bitcoin wallet and one of the world’s largest futures exchanges, CME, announced it will soon include a Bitcoin contract. However, is this a passing fad or will your company genuinely benefit from investing in the cryptocurrency phenomena?
Learn more before diving in
If you are planning to speculate on a cryptocurrency, treat this enterprise in the same way as you would any other uncertain venture. Cryptocurrencies have no value of their own and their worth is based upon what people will pay for them, so significant lurches in price both up and down can occur. The clearest display of this volatility came on 11th April 2013, when the price of Bitcoin soared wildly to over $260, before falling to $130 later in the afternoon. To find out more about how the system works, the price drivers and the level of risk, sites like IG UK are worth checking out before getting started.
Demand could push up the price
Mainstream recognition and usage are key value drivers for cryptocurrencies, but many speculators have also noted that as demand increases so will the currency’s value. Unlike banknotes, Bitcoin and others like Litecoin (LTC) are not simply printed off but are generated through a series of processes called mining. This means that they may become a relatively scarce resource – although some, like LTC, can be generated faster than others.
Cryptocurrencies could store value for the future
Although the online blockchain transformation is still a long way off, it is thought that when this highly secure form of payment platform does arrive, it will work best with cryptocurrencies. That’s why cryptocurrency providers Ethereum, work with blockchain technology already and have used it to create Smart Contracts, which are predicted to become big news in the near future. These coded computer protocols make contractual agreements easier to obtain and enforce, without the need for a middleman. Much like a vending machine, buyers will be able to obtain shares, property or anything else of monetary value with the click of a crypto-payment button. Whether it takes two or five years for concepts like Smart Contracts and blockchain payments to become commonplace, when they do it is cryptocurrencies which will fuel the trend.
Cryptocurrencies ride out global instability
Times of instability and political unrest are generally considered to harm the stock market. It’s worth is bound up with many well-recognised companies that rely on factors like a stable economy, dependable personnel and a solid government to function. When it comes to cryptocurrencies, however, this is not the case. These are not supported by any government and don’t rely on public services. Therefore, if your company is concerned about future political or social upheaval affecting the financial sector, cryptocurrencies could present an attractive alternative.
The time is now
Although Bitcoin is currently enjoying the lion’s share of the market, this is unlikely to last as competition from other anonymous, global cryptocurrencies accelerates. Coupled with Bitcoin’s high profile, this is causing more and more speculators to pay attention to the potential of cryptocurrencies and hand over their investment cash. Ground floor prices are certainly not on offer anymore, but growth may continue for some time yet, so if your company is interested, the time for a small leap of faith is now.
Further reading on cryptocurrencies