Around March last year one of my closest friends was encouraging us to get into Bitcoin, confidently predicting it would be a great investment.
My geeky group of friends had been discussing and speculating about Bitcoin: the concept, how it works, its utility and value on and off for more than year before that ringing endorsement so we knew what he was talking about and understood the general concept of cryptocurrency but until that point in time, most of us hadn't actually bought any. Our friend had started getting into it a couple of weeks before that and the early results, along with his research into the matter had convinced him Bitcoin was going to be the next big thing.
This particular friend of mine is one of the smartest, most practical yet risky-financial-investment-averse people I know, so his sudden endorsement of Bitcoin was very intriguing, especially because we had already been talking about cryptocurrency for months.
The price of Bitcoin at that time was just below $1000 and by then, I had almost convinced myself to get 1 Bitcoin just to see how it would go. But the fear of the unknown made me take my own sweet time researching more and looking for reasons why I shouldn't “invest” in something as radical and volatile as cryptocurrency. After all, by then Bitcoin had already gone through a couple of ups and downs and it was tough putting money in something so radical, vague, and new.
The biggest thing that stopped me from getting Bitcoin then was my Friendster vs FaceBook analogy which goes: yes, Bitcoin may be the biggest and most dominant of all cryptocurrencies, but what if it is Friendster and crypto's equivalent of Facebook is just coming along?
I meant to get Bitcoin but I never did, even when the price started shooting up like crazy. When 1 BTC became 2,000USD, I told myself it would be smart to wait for the price to drop before buying. I told myself the same thing when it was 4,000. By the time it hit 10,000, I was kicking myself for not moving quickly but at that point I believed I was too late to the party, even if Bitcoin advocates were predicting that it would hit 20k within a year.
Bitcoin went on to peak at almost 20,000USD before 2017 ended and at that point I was constantly thinking about those weeks in March 2017 when my friend was telling us and we had agreed with him it would be smart to get at least 1 Bitcoin. If I had acted instead of hesitated, my investment could have grown 20x within 10 months.
However, the value of Bitcoin started falling after it peaked, sliding “down” to 6,000USD last week. Even then, if you come to think of it, I still would've made 6x my money within a year if I had only listened to my friend.
Do I regret not getting Bitcoin almost 1 year ago? Yes I do.
Would I still get Bitcoin now, after all that has happened? I honestly don't know. Is this drop from peak 20k to 6k the beginning of the end? Have we just reached the point at which the value of cryptocurrencies start to stabilize? Or is just warming up for another jaw-dropping rise?
While I think about that and wonder what will happen if next year If I get Bitcoin now: will I be regretting it or patting myself on the back for grabbing this rare opportunity to make easy money hand over fist; lets talk about Bitcoin and cryptocurrency.
There's no easy way to explain Bitcoin. Cryptocurrency is defined as a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. If you come to think of it, the concept of traditional money is already a difficult concept to grasp but now we take out the government and its central bank and replace what they do with technology.
My best analogy for cryptocurrency would not be money but gold. Gold is something of value that we can trade for goods and services but because not everyone has gold in their pockets, those who have it would exchange it for money based on its value in the market and that is determined by how many people want and need gold.
Gold is mined by digging the earth while cryptocurrency is “mined” by people who use computers to solve the problems, transactions and puzzles required by the system to ensure that all the “coins” and transactions are legitimate.
Gold is a finite resource and so is Bitcoin. Its anonymous designer says there will only be 21 million Bitcoin ever made. I don't know about all the other cryptocurrencies in the world but anyone who buys into something that isn't definitely finite probably deserves to lose their shirt.
If we use that analogy, the cryptocurrency rush of 2017 could be similar to the gold Rush of the mid 1800's. When people started recognizing the value of Bitcoin, everybody who saw the opportunity to make money wanted it and that demand drove its price to ridiculous heights.
The price drop is a bit harder to explain but it could be the effect of governments fighting back, people cashing out, or people starting to see the limitations of cryptocurrency. Another reason could be the coming of the copycats. Aside from the pioneers Bitcoin, Ethereum, Litecoin and Ripple, there are an estimated 3,000 cryptocurrencies out there, all with their own schticks and algorithms, all without government control or regulation. In gold rush terms, that's a lot of fool's gold flooding the market and that means a lot of fools.
There is no way to know definitively where Bitcoin will go in the next few months. Advocates say it will hit USD 30k. Critics say it is going down. What is certain there is still lots of money to be made for those who understand the concept of cryptocurrencies, the risks involved, and are lucky just as there will be those who could lose the shirt off their back for getting into something they didn't bother to understand just because it is all the rage.*
Follow on Twitter: @bindadu
back to top