Do you want to start investing in cryptocurrency but are not sure where to begin? You are not alone; many people want to get started with cryptocurrency but do not have much knowledge about this relatively new and complex form of currency that seems to be everywhere this day and age. As with any type of investing, you must have a clear understanding of how it works so that you can be smart with your money and make the right decisions. Here is what you need to know to get started investing in cryptocurrency.
What Is It?
So, what exactly is cryptocurrency? This is, essentially, a digital asset designed to work as an online medium of exchange, which is secured by cryptography, which makes it practically impossible to forge or double-spend, and therefore is incredibly secure. Many are decentralised networks using blockchain technology and not issued by a central authority, so they are free from government interference.
The Market
As with any type of investing, it is essential to understand how the market moves before you get started. There are various coins to invest in, all of which affect one another, so it can be a complex marketplace. Some places are quite stable, such as LTC and Bitcoin, and these are a smart place to keep the majority of your holdings. You could then use a smaller percentage for coins with a higher reward potential but smaller market caps.
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Research and Watch the Markets
Again, as with any type of investing, research and patience will be helpful when investing in cryptocurrency. You should research the teams behind different coins and understand what their vision and goals are, which should help you to identify those that have good potential. It would be smart to then study the charts of the coins that you want to invest in for a few months - it can be extremely volatile, so you will want to have an idea of the price range and pick a good entry point.
Get Expert Guidance
Investing in cryptocurrency can be complicated and confusing, but there are a lot of helpful experts out there that can help you to make intelligent decisions with your money. You can receive live bitcoin trading signals from experts along with helpful tools that will help you to make the right decision at the right time to see your wealth grow.
Start Off Small
It is an idea to test the waters at first and to start off small. Everyone takes losses at some point, and this is how you learn how to be smarter with your investments, so starting off small, being patient, and making sure that you are learning as you go will be critical for future success in cryptocurrency investment.
Hopefully, this post will give you the information and confidence that you need to get started investing in cryptocurrency and to begin building your knowledge while finding some early success with trading.
Subscription models now extend into everything from the automotive to the supermarket industry and include everything from pet food to virtual spin classes. Alongside online advertising, subscriptions are a business model that has exploded in popularity, because monthly digital payments provide more long-term recurring revenue streams than one-off sales and generate long-term online customer relationships. 10 million people signed up for Disney+ within 24 hours of its November debut, and Salesforce.com is valued at around $140 billion, giving some illustration of the commercial success of the subscription model.
However, the model is now in danger of becoming a victim of its own success, with industries heading hard and fast towards a ‘peak subscription’ cliff edge. There is simply a finite limit to the number of services people and businesses are willing and able to subscribe to. Customer recruitment and retention is extremely difficult because subscriptions can be an expensive, long-term commitment; half of subscribers to e-commerce services cancel within six months. At the same time predatory practices such as those in smartphone apps make consumers increasingly wary about “subscription traps.” Finally, the subscription economy is excluding billions of people who cannot afford expensive long-term contributions. For the newspaper industry, this means not only shrinking the potential market but denying all but the relatively privileged access to the independent information that is vital for democracy to operate. It also means denying industries the ability to offer ‘low-hanging fruit’ of smaller, cheaper transactions for more limited services and thus denying them access to a far bigger customer base. Professor Aggelos Kiayias, Chief Scientist at IOHK, suggests how new technology could provide an alternative model.
There is evidence that ‘micro-transactions’, where people have the option of paying tiny sums, as little as a fraction of a penny, for individual services such as songs or articles, can cumulatively offer a rich revenue stream. Free-to-play mobile games generated $88 billion through other services such as ‘micro-transactions’ in one year alone. Mini-transactions also form a potential ‘gateway’ to a bigger subscription market by offering initial ‘taster’ services to a wider audience.
A key barrier to this has been that slow transaction speeds and high transaction fees make ‘micro-transactions’ unviable as a lucrative revenue model across all industries. Even the fastest, VISA, can only process some 24,000 transactions a second. The blockchain space has also hitherto offered little in the way of a solution because of the so-called ‘scalability problem’ which seems intrinsic in the protocol design of systems like Bitcoin. This makes transactions slower and fees higher, the more users are added to the network.
Free-to-play mobile games generated $88 billion through other services such as ‘micro-transactions’ in one year alone.
A New Model
A recently announced system based on a “proof-of-stake” blockchain discipline, dubbed Ouroboros Hydra, is set to challenge the subscription economy and enable a new payment model which has potential to revolutionise the financial services industry. The third-generation “layer-2” protocol will allow parallel processing of transactions to take place at the physical limits of the network without compromising security or relying on energy expensive “proof-of-work.” This could allow the blockchain to scale to process millions of minor to major transactions on cell phones, outpacing conventional payment systems used by current subscription services. Unlike conventional “layer-1” blockchains, its overall transaction processing throughput can get faster as the number of nodes in the network increases.
With revenue models based on digital advertising and subscriptions nearing a cliff-edge, such high-speed third-generation blockchains could allow new industries to emulate the mobile gaming industry’s ‘freemium’ model, allowing users to pay for extras to their basic service. Customers will be able to pay in cryptocurrency rather than fiat currency. A set of simulations conducted as part of the research announced, show the system demonstrates sufficient transaction speeds to minimise transaction fees, facilitating ‘micropayments’. This opens up the possibility of an alternative to the subscription economy.
Access for All
A genuinely decentralised and scalable blockchain protocol could create an economy based on millions of ‘micro-transactions’. On an individual level, online newspaper readers could pay per article rather than paying a set amount per month, or gamers could buy virtual items within a game for fractions of a penny. Companies can also engage in more fine-grained business-to-business exchanges. This new protocol can therefore open up online services for people who may otherwise be unable to afford them, opening up a bigger mass market to industries, or systems for which so far it was uneconomical to do so. ‘Micro-transactions’ provide a way to ‘on-board’ people as longer-term customers as well as providing an alternative revenue stream to subscription.
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Limitless Potential
Importantly, Ouroboros Hydra is not just a transaction processing system. It is capable of offering smart contracts as well which means it would be possible to encode and enforce various policies related to the ‘micro-transactions’ processed by the system. The result is a flexible design that can also accommodate any elements of the subscription model for those participants, users and businesses alike, who prefer it. Furthermore, taking advantage of suitably crafted smart contracts, novel business models can be developed hybridising between the two approaches and thus allowing innovative and highly tailored and personalised engagement between businesses and customers.
What Next?
This is only the start. Decentralised and scalable blockchain protocols could enable millions in the developing world to enjoy access to previously inaccessible financial services, such as remotely paying for vital services like utilities and healthcare. In this way, we can pave the way towards a more inclusive, truly decentralised, people-centric banking system, which can form the future backbone of financial services.
The figure is the average of 10 FinTech leaders' individual predictions, who speculated what might be in store for the coin in 2020 in a new report from financial comparison website Finder.com. With Bitcoin’s recent price decline, nearly everyone on the panel (90%) agreed Bitcoin has not been immune to corona-triggered asset sell-offs.
Technologist and Futurist at Thomson Reuters, Joseph Racynski, noted that in the current climate institutional investors were quick to dump Bitcoin.
“The reason for the drop in BTC price is a direct result of institutions unloading the coin in a rush to cash as soon as the virus impact was identified. It happened across all assets, but what it proved was that institutions actually did invest over the last few years in crypto”, he said.
However, just half the panel (50%) say the decline is a result of Bitcoin's failure to hold its price as traditional markets drop, suggesting Bitcoin might not be simply mirroring the equities market.
Either way, recent price movements have impacted Bitcoin’s viability as a safe haven asset, according to a panel majority (60%). Managing Director at Rogue International, Desmond Marshall, said techies and coin buyers wishfully hope bitcoin could become a safe haven asset like gold.
Recent price movements have impacted Bitcoin’s viability as a safe haven asset.
Meanwhile, Co-founder of Finder, Fred Schebesta, said that a short term correlation with traditional assets does not diminish Bitcoin’s status as a safe-haven asset.
“Aside from Gold, the list of alternative assets to consider as a hedge against uncertainty in the global markets are far and few between. To me, Bitcoin remains one of the most attractive assets to help diversify a portfolio looking to hedge risk in the coming years”, he said.
Managing Director at Digital Capital Management, Ben Ritchie, conceded that Bitcoin is currently seen as a high-risk asset but argued it could be a safe haven down the track.
“Bitcoin is being positioned as a future safe haven but currently is considered as a high-risk asset", he said.
“The recent short-term liquidity impact contributed to its correlation to equity markets and does not impact its future viability to become a safe haven. It continues to trade more in line with risk assets than safe havens, which is consistent with its performance to-date in periods of extreme market volatility… It is interesting to note that even gold has suffered from violent price fluctuations recently dropping approx 12% before bouncing off its 50-week moving average.”
While the panel was divided on the future of Bitcoin, they largely agreed that market conditions will eclipse any hype as a result of the halving.
COO & Co-founder at MarketOrders, Julia Sukhi, was just one of two (20%) panellists to say recession fears won’t nullify hype around the halving.
“As markets become weaker and chaotic, there will be certainty in the BTC markets in terms of the halving so more attention will be attracted to this event”, she predicted.
Interest in digital currency has grown significantly in the last few years. In this piece, we explore what digital currencies are, the current state of the cryptocurrency market and how it will impact the economy over the next few months based on current trends and events occurring in the UK.
Put simply, cryptocurrency is a digital currency managed by a network of computers.
Run through open source code, computers are used to verify each cryptocurrency transaction. Unlike traditional physical currency, they are decentralised and not managed by a central bank.
You have probably already heard of Bitcoin, which was one of the first types of cryptocurrency to come into existence. However, hundreds of other currencies have been developed since and each have different characteristics. For example, the coin Ethereum can be used to create contracts and run applications, while Litecoin and Bitcoin Cash run in a simpler way to Bitcoin, with the focus of these currencies being on processing transactions.
The technology used to manage these transactions is known as Blockchain. This technology has been around for a while and is used for many other purposes, including updating healthcare records. The UK government is even investing in blockchain to record and administer pension and benefit payments.
Cryptocurrencies have a huge amount of potential, particularly when it comes to providing accessible options for allowing people across the world to exchange money.
Currently, the use of cryptocurrency is still an emerging trend with a limited number of businesses accepting it as a payment method. These digital currencies are experiencing somewhat of an identity crisis as debates around its definition as a currency or commodity continue and authorities argue over whether it should be regulated.
Cryptocurrencies have a huge amount of potential, particularly when it comes to providing accessible options for allowing people across the world to exchange money.
However, governments and banks are reconsidering their cautious attitude towards digital currency as global businesses begin to invest in this technology. Facebook’s upcoming launch of their coin, the Libra, has caught the attention of the Bank of England. The BoE have warned Facebook that their currency would need the same level operational resilience as debit and credit card accounts, if they are to manage high volumes of transactions securely.
Libra will not be decentralised like other cryptocurrencies. Instead, it will be managed by an association of major technology and financial service companies.
Some EU governments have taken a hard-line approach, with France’s Finance Minister declaring that they will not allow the use of Libra within Europe. They state that the currency would put consumers at risk of financial fraud. Nevertheless, with the UK’s recent withdrawal from the European Union, it is likely that they will be exempt from such measures.
Brexit has also presented new opportunities for cryptocurrency processors. It is predicted that more cryptocurrency exchange offices will open in Dublin in 2020. This hotspot is ideal as it is an EU member with close proximity to the UK market.
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While cryptocurrencies are often seen as a highly volatile form of currency, the recent worldwide Coronavirus outbreak has had a damaging impact on the global economy and resulted in investors seeing digital currencies as a safe haven.
The virus is predicted to result in consumers buying less at physical stores as they avoid getting infected. As a result, the amount of online purchases being made is set to increase significantly, and with more powerful firms such as Facebook migrating over to cryptocurrency transactions, we can expect more and more of these purchases to be made with digital money.
However, Bitcoin’s role in the wider financial ecosystem could be much larger than gold because of its super-fast transaction speed and its ability to work with cross-border transactions.
Below Finance Monthly has heard from Marie Tatibouet, CMO at Gate.io, who explains that while gold is universally recognized as a low-risk, low-returns but stable asset, Bitcoin is emerging to be a new investment option with great returns in a digital economy.
Gold is widely recognized as a safe-haven asset for being traded as both currency and commodity, and considering its scarcity and stable value, it is a national strategic reserve. Bitcoin, on the other hand, with its $15.7 billion market cap in 2020 and a total supply of 21 million since its launch, has been a hot topic of discussion. According to Bank of America’s securities report, Bitcoin gained 8.9 Million percent over the last decade; an investment of $1 in Bitcoin in 2010 would now be worth more than $90,000. Lately, the blockchain technology applications have gained a lot of popularity, giving Bitcoin an edge over Gold. Moreover, gold is heavy and is subjected to rigid supervision and heavy taxation while Bitcoin can be traded efficiently and flexibly owing to its barrier-free circulation and around-the-clock trading in the digital economy.
An investment of $1 in Bitcoin in 2010 would now be worth more than $90,000.
Gold And Bitcoin As Safe-Haven Options
There is a positive correlation between the price of gold and inflation while the correlation between the price of USDX and other major stock indexes, such as DJI and S&P 500, is negative. During the times of economic recession and political turmoil, gold can be a “safe-haven asset” for investors, considering its price change trends.
According to the “Bloomberg’s 2020 Crypto Outlook” report, there is an increasingly negative correlation between the price of Bitcoin and the US dollar. It also shows the greatest-for-longest Bitcoin-to-dollar negative 52-week correlation since 2010. This measure of the relationship of alternative currency to the dollar is about the same as for gold.
Inflation indicates the purchasing power of a currency. Federal Reserve policymakers target an inflation rate of 2%, which is an antidote to fiscal turbulence, triggered by extreme inflation or deflation. Most economists point out that greater economic development can be achieved with a mild stimulus given an inflation rate between 2% to 3%. Conclusively, with a lower inflation rate than gold, Bitcoin could be more suitable for being a safe-haven asset.
Price Trends of Bitcoin And Gold During Extreme Events
If we analyze the price fluctuation of Bitcoin and gold in the long-term and short-term, there has been a significant price change trend during extreme events.
A Decade-long Trend
Price Trends of Bitcoin and Gold / Data Source: Investing
From the long-term price trend, the price of gold is far more stable than Bitcoin during the past ten years, but ROI (return on investment) is the opposite. Gold has a distinct characteristic of being a safe-haven asset, and Bitcoin has had a soaring ROI since 2017, accompanied by a high risk. With an escalating China-US trade war, both countries declared imposing tariffs on each other on August 2, 2019. The below graph shows the price changes of Bitcoin and gold one week before and after the event.
Price Contrast of Bitcoin and Gold during China-US trade war / Data Source: TradingView
Sentiments Of Investors During Extreme Events
The sentiment index of gold is steady without huge fluctuations as compared to the Bitcoin. However, if a major event strikes the economy, the sentiment index of Bitcoin is more likely to see a significant surge than gold. As a result, people are more likely to buy Bitcoin as a safe-haven asset to confront the national breaking events. However, as an asset for value preservation, the sentiment index of Bitcoin is less stable than gold’s, owing to an unclear attitude of various countries towards Bitcoin.
Conclusion
Bitcoin, with its flexibility of free barriers and around-the-clock trading, is more sensitive towards bad events than gold. Even though gold is steadier than Bitcoin during market fluctuation and extreme events, Bitcoin is more effective in the short term when it comes to hedging, especially against the turbulent markets.
Cryptocurrencies are often compared to gold. They have a number of features in common – independence from governments, limited emission, and a user consensus ascribing value to them. This is especially true in the case of bitcoin, the first cryptocurrency that still retains the status of the “default crypto”, just like gold retains the status of the most important precious metal.
However, cryptocurrencies are also vastly different from metals: they are a lot easier to trade. Below Victor Argonov, Analyst at EXANTE, explains more for Finance Monthly.
Physical gold is extremely difficult to buy, sell, and trade across national borders, and nearly impossible to use as legal tender. Gold turnover is subject to heavy taxation, and many prefer to invest in precious metal accounts instead of physical gold. Cryptocurrencies, on the other hand, are easy to buy and sell, can be freely traded across borders, and their use as legal tender is becoming increasingly more common.
These similarities and differences between cryptocurrencies and precious metals are common knowledge. However, one crucial question remains unanswered – how much they are able to function as a protective asset, retaining their value during crises.
Theoretical Considerations
Currently, one of the key arguments against the use of cryptocurrencies as protective assets is their high volatility. BTC cost $0.1 in 2010, $1,000 in late 2013, $200 in late 2014, $19,000 in late 2017, and around $7,000 today. Even just in 2019, which can hardly be called a particularly volatile year, its exchange rate still fluctuated by a factor of four over the year. Crashes are commonplace on the market, and no matter when you buy cryptocurrency, there is no guarantee that your capital is not going to halve in a month.
On the other hand, the key argument for keeping one's funds in cryptocurrency is its tendency to grow in value as the number of its users increases. Cryptocurrency emission is limited by algorithms. With BTC specifically it is actually decreasing, which minimizes inflation. Currently a few dozen million people on Earth use cryptocurrencies, and their number doubles every year. Even 2018, disastrous as the year was, saw the number of users increase from 18 to 35 million. At the same time, the potential new audience is still huge, and in tandem with guaranteed low inflation it usually stimulates growing exchange rates, regardless of the bubbles that may occur.
The key argument for keeping one's funds in cryptocurrency is its tendency to grow in value as the number of its users increases. Cryptocurrency emission is limited by algorithms. With BTC specifically it is actually decreasing, which minimizes inflation.
The increasing number of crypto users not only boosts the cryptocurrencies' exchange rates and capitalization, but gradually decreases their volatility as well. Here is a rough comparison, which nonetheless illustrates the situation. Over the four years between 2010 and 2013 the BTC exchange rate changed by four orders of magnitude, while in the next four, including the dip in 2014 and the enormous bubble in 2017, it only changed by two orders of magnitude. It is true that even the modest fluctuations in 2019 are huge compared to the traditional stock and currency markets, but this is a predictable consequence of the low market cap, which is currently at around $200B. Even when taken individually, the world's largest companies like Facebook or Saudi Aramco have market caps several times that amount, while those of the global stock and currency markets have several orders of magnitude that market cap. So the current volatility of the cryptocurrencies may simply be a sign that they are still in their infancy.
Practical Evidence
There are many known cases of cryptocurrencies serving as a protective asset, primarily during national currency crises. In 2018 the national currencies of Turkey, Argentina, and Venezuela experienced drastic devaluation. While previously citizens of these countries tried to buy dollars in similar situations, this time many people turned to cryptocurrencies. As an example, in August 2018 the number of cryptocurrency users in Turkey was double the average number for Europe.
The cryptocurrencies' protection against fiat currencies' devaluation is not limited to unstable countries with only a small share on the global market. For example, statistics show that the BTC exchange rate usually increases as the Chinese yuan's rate drops.
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However, none of these examples make cryptocurrency unique. When one country's fiat currency devalues, any other country's fiat currency may serve as a protective asset if it is more stable. What makes gold unique is that its role as a protective asset is universal. Not only does it protect its owners from national currency devaluation, but from stock market crashes as well. Gold exchange rate is not particularly stable and has its own fluctuations, but it is fairly independent of stock index fluctuations. Does cryptocurrency have the same advantage? As practice shows, no.
From 2014 to 2017 BTC's exchange rate usually changed in the same direction as the indices, and often with much greater amplitude. In the fall of 2018 it briefly looked like the situation was changing. The 2017 bubble had already deflated, and the volatility of the digital assets dropped by several orders of magnitude (as it usually happens after bubbles). When American stocks started dropping in price due to the trade war with China, BTC did not follow the market's lead and had indeed served as a protective asset.
However, it was unable to cement that role. November already saw a new cryptocurrency crash that was followed by the infamous crypto winter. Whether it was chance or an expected event, it roughly coincided with the maximum dip in the stock market. The indices recovered due to the negotiations between the US and China in the spring of 2019, and so did the cryptocurrencies.
Very Risky, But Still A Protective Asset?
Overall, the properties of gold and cryptocurrencies as protective assets are very different. If you are afraid of your national currency experiencing inflation, cryptocurrency can protect your capital, but if you are a stock investor, expect cryptos to dip during a crisis as well. The reason for this is simple: despite their advantages, cryptocurrencies are still considered a very risky asset compared to securities and gold. They are exactly the assets the investors try to get rid of as soon as possible during difficult times.
Despite their advantages, cryptocurrencies are still considered a very risky asset compared to securities and gold. They are exactly the assets the investors try to get rid of as soon as possible during difficult times.
On the other hand, in the long term cryptocurrencies are still a protective asset. If you are not afraid of long exchange rate dips and are not prone to dumping all your assets during crashes, you will probably be rewarded over the years. While cryptocurrency growth on the scale of 2010-2013 is unlikely, their exchange rates are still expected to multiply in the next few years. To date, every bubble on the crypto market resulted in a substantial growth of the exchange rates. For example, the BTC rate of $3,000-4,000 during the crypto winter of 2018-2019 was vastly higher than in any year before the 2017 bubble.
The only thing that can seriously undermine the global positive trend of the cryptocurrencies is a complete ban on them by leading countries. However, this seems unlikely. With every year, more and more influential financial communities join the cryptocurrency market, and they would not want to leave it.
The increasing popularity of cryptocurrencies will eventually slow down their upward trend, but is also likely to greatly decrease their volatility and make them more similar to traditional protective assets like gold. How close that similarity would be is, as yet, unknown.
This is the warning from Nigel Green, deVere Group CEO and founder, as the world’s largest cryptocurrency jumped more than 4% on comments made by Jerome Powell that the Fed is investing a significant amount into digital currency development.
Mr Green states: “This is further evidence that not only all major banks, government agencies, plus most sectors including tech, entertainment and real estate, are piling into cryptocurrencies – but that central banks are too.
“The previously sceptical Fed has not, until now, admitted how rapidly digital currencies could become a systemic risk to the US dollar’s status as global reserve currency.
“This is a major step in underscoring – especially to those backward-looking traditionalists – that, whether they like it or not, digital global currencies are not only the future of money, they are increasingly the present too.”
He continues: “The development from the Fed comes following news that China – a communist state and the US’s main economic rival – is currently developing what has been described as an all-powerful cryptocurrency. It could be ready this year and be the world’s sovereign digital currency.”
Mr Green goes on to say: “Whilst there will be minor peaks and troughs – as in all markets - I predict the overall trajectory of Bitcoin to remain upward for the next few months.
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“Besides increasing institutional awareness and development, other major factors driving its price advance will be coronavirus.
“Bitcoin’s price is likely to continue to jump until the coronavirus peaks because of the growing consensus that the digital currency is a safe-haven asset.
“Its status comes from the fact that it is a store of value, scarce, perceived as being resistant to inflation, and a hedge against turmoil in traditional markets.”
He adds: “Another major price driver will be the next halving event.
“The code for mining Bitcoin halves around every four years and the next one is set for May this year. When the code halves, miners receive 50% fewer coins every few minutes. History shows that there is typically a considerable Bitcoin surge resulting from halving events.”
The deVere CEO concludes: “The Fed’s public acknowledgement of cryptocurrencies was important, but most investors have already known that major central banks around the world are developing crypto.
“As such, the main drivers for Bitcoin price for the next few months will remain coronavirus and May’s having event.”
(Source: deVere Group)
In a session titled ‘Shaping the Future of Financial and Monetary Systems,’ yesterday, co-founder and CEO of Circle, Jeremy Allaire shed light on the biggest problems the cryptocurrency and wider financial systems are currently facing.
Speaking to delegates in Davos, Allaire highlighted the existence of an arc, by which these systems journey and end up, where we are currently sit in said arc and what we can expect further on. He said: “For the financial system, we are at an inflection point and moving from the periphery to the core. For example, moving away from the likes of just ‘making access better’ to finally visiting the core of financial system — such as, the nature of money, how distributed and utilised.”
He emphasized that since the credit crisis 10 years back, “we’ve seen growth in alternative architecture,” referring to the likes of blockchain, cloud, cryptocurrencies and stable coins. He also pointed out however that for now, the biggest challenge ahead is regulation and policymaking, comparing some of the sector’s struggles to those of other sectors like media and communications.
Stressing the need to drive policy in line with innovation, he said: “None of us would like to go back to a time where we can’t freely communicate with anyone on the planet without any intermediation with some rare exceptions. We all accept as society, trade-offs. [For example] we have open communications but we also accept the fact that terrorists can recruit people on YouTube. We’re not saying shut down YouTube.”
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“The financial system is different to communications and there are identity and risk issues that are real but we have to revisit how those issues are solved — right now it’s the blunt forced mechanism for enforcement which ends up tying to national sovereigns and their policing mechanisms. We have to look for global schemes and technology driven approaches for identity risk that run alongside blockchains and digital currencies,” he said, according to Yahoo Finance.
Nigel Green, the chief executive and founder of deVere Group, explains that as Tehran threatens “revenge” on the US over the killing of Qassem Soleimani, the commander of Iran’s elite Quds Force, who was in charge of the country’s regional security strategy.
It remains uncertain how, when, or if Iran will respond, but any retaliation is unlikely until after the end of three days of mourning.
Last week we saw the price of oil jump as a result of political tension. This week, Bitcoin, the world’s largest cryptocurrency by market capitalisation, jumped 5% as news of the strikes broke around the world on Friday. Simultaneously, the price of gold – known as the ultimate safe-haven asset - also moved higher.
We’ve seen Bitcoin price surges before during times of heightened geopolitical tensions. For instance, in August it jumped as global stocks were rocked by the devaluation of China’s yuan during the trade war with the US.
According to Nigel Green, this latest Bitcoin price increase underscores a mounting consensus that Bitcoin is becoming a flight-to-safety asset.
“Bitcoin is living up to its reputation as ‘digital gold’. Bitcoin - which shares gold’s characteristics of being a store of value and scarcity and of being perceived as being resistant to inflation – could potentially dethrone gold in the future as the world becomes increasingly digitalised.”
He continues: “With an escalation in geopolitical turbulence, which typically unsettles traditional markets, it can be expected that a growing number of investors will decide to increase their exposure to decentralised, non-sovereign, secure currencies, such as Bitcoin, to help protect them from the turmoil.
“The serious concerns created by geopolitical issues, such as the US - Iran issue will likely prompt an increasing number of institutional and retail investors to diversify their portfolios and hedge against those risks by investing in crypto assets.
"This will push the price of Bitcoin higher. In turn, due to the market influence of Bitcoin, other major digital currencies will receive a price boost.”
The deVere CEO concludes: “Bitcoin was one of the best-performing assets of 2019 and we can expect to see its investment appeal further strengthen as it becomes known as a safe-haven asset during periods of heightened geopolitical tensions.”
Below Peter Wood, CEO at CoinBurp delves into the current crypto-scene, the value of Bitcoin and the grey cloud that looms over the future of crypto-investment.
Bitcoin saw highs of over £7,000 at the end of October, dropping to just over £5,000 in the early hours of the 25th of November – a 6 month low.
Just as media headlines and finance experts began to offer damning opinions on the declining value of the digital currency, bitcoin skyrocketed – increasing by £600 in value within just six hours.
This is not surprising. In fact, at any given time of the year, a 24-hour cryptocurrency price chart will have more peaks and troughs than a rollercoaster. Therefore, first-time crypto investors should never be concerned about the declining value of their digital finances, as they need only wait a period of time, be it a week or a month, before the value soars again.
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Newcomers to cryptocurrency, or those who have considered investing in cryptocurrency, should do their best to ignore the negative media headlines when Bitcoin suddenly drops in value, as there is quite simply no better time to invest. With any business investment or purchase, the aim is to buy low and sell high. Those who invested in Bitcoin this time last year probably purchased at the value of £2,500 to £3,000; within just seven months, this value more than tripled to around £9,500.
Therefore, investors should never be concerned about the short-term future of their digital finance investment. In fact, one can be optimistic when looking at the fact that, year on year, the tail end value of Bitcoin has grown increasingly higher – thus demonstrating gradual annual growth in the way of higher lows, and possibly even higher highs to come.
A grey cloud that looms over cryptocurrency, however, is what is known as bitcoin halving: this is where the number of bitcoin rewarded to miners for every block mined is cut by half, occurring every time 210,000 blocks are mined. As it stands, the next bitcoin halving is expected to take place in the middle of May 2020.
Much like the short term value of Bitcoin, nobody knows exactly what impact the next bitcoin halving will have on the value of the cryptocurrency – all we can say for sure, is that the next bitcoin halving is expected to have a significant effect on the price of bitcoin, we’re just not certain about whether this ‘effect’ will be positive or negative, upwards or downwards.
Much like the short term value of Bitcoin, nobody knows exactly what impact the next bitcoin halving will have on the value of the cryptocurrency.
If cryptocurrency has set any precedent, however, it’s that low valuations and high valuations are never permanent. If the upcoming bitcoin halving does cause a large-scale crypto crash, you can be rest assured that your money has probably not been lost forever. On the other hand, it could be worth investing in bitcoin at the next affordable opportunity before the halving, in preparation to reap the rewards of a possible soar in value.
I would love to offer specific, short term investment advice on when exactly to invest in cryptocurrency, but the time between me publishing this article, and you reading it, could be the difference of thousands of pounds in any given cryptocurrency market.
This depends on many factors, but you can still determine it nonetheless. Here's how you can do it.
Which cryptocurrency?
First, remind yourself which cryptocurrency you will be buying or choose one if you haven't decided yet. Here are the most popular types of cryptocurrency to choose from:
- Bitcoin: Abbreviated as BTC, Bitcoin is probably the most popular of all the cryptocurrencies. You can purchase it almost anywhere.
- Bitcoin Cash: Abbreviated as BCH, Bitcoin Cash was only launched in 2017 and has since become pretty widespread.
- Litecoin: Abbreviated as LTC, Litecoin is only two years younger than Bitcoin and is quite well-known as well.
- Ethereum: Abbreviated as ETH, Ethereum could be primarily found on the platform of the same name.
There is no right or wrong cryptocurrency to buy, so consider all your options and make a choice you will be satisfied with.
Why are you buying it?
The next thing you should do is think of why you are buying the cryptocurrency you chose. Consider what you will be doing after you purchase the cryptocurrency. Are you going to sell it? Or maybe you will be donating it or gifting it to someone?
This point is very important as it will decide your further actions. You must know what goals you are pursuing so that you can find the best means to achieve them. Besides, some cryptocurrencies might have technical restrictions that will prevent you from doing what you want to do.
Remember that the cryptocurrency market is constantly evolving and changing. For instance, there’s this new concept of stablecoin being developed that may be the next big thing in the world of cryptocurrencies.
“Stablecoin initiatives are developing at a rapid pace. Adoption of stablecoin, a form of collateralized cryptocurrency pegged to a stable fiat currency like the yen or dollar are being debated by central banks,” says Robert Anazalone, an expert on cryptocurrencies.
What is your financial situation?
You are probably aware that some cryptocurrencies are more expensive than others, so if you are on a budget, you probably won't be able to buy them. You have to take into account your financial situation before going online and looking for your cryptocurrency.
“Due to the limitations placed on capacity, cryptocurrencies like Bitcoin and Ethereum see higher transaction fees when the networks become congested,” writes Kyle Torpey, a writer and a specialist on Bitcoin, in an article for Forbes.
At the same time, this point is directly tied up with the next one as the current state of the market will influence the price of your chosen cryptocurrency. Sometimes, even a usually cheap currency may cost more due to the fluctuations in the market. This can also influence what you will be buying and when.
What is the current state of the market?
Last but not least, think of the current state of the market. Research and read about what is going on so that you are aware of the situation and clearly know what you are doing. Analyze the data you collect and decide whether or not it's the right time to buy cryptocurrency.
You should be conducting such research and analysis regularly so that you can determine the best time for buying your chosen type of cryptocurrency.
Clem Chambers, the CEO of private investors website ADVFN.com and author of Be Rich, The Game in Wall Street and Trading Cryptocurrencies: A Beginner’s Guide, says: “Market timing is incredibly difficult, especially in a hugely volatile asset like bitcoin.”
Final Thoughts
To sum up, try to be skeptical of what you read online when someone is claiming that it is the right time to buy cryptocurrency. Read and research or seek help from a professional adviser to understand when is the right time to buy and which cryptocurrency to choose.
This was authored by digital marketing executive Cynthia Young .
Crypto’s kryptonite?
In guidance released in June 2019, the Financial Action Task Force (FATF) revealed its latest standards for mitigating money laundering and terrorist financing. The 200 global jurisdictions committed to FATF recommendations are required to comply with Recommendation 16 aka the “travel rule”. What this means for Virtual Asset Service Providers (VASPs) registered or licensed within FATF member countries is that they will be required to exchange and hold personally identifiable information (PII) to each other when transferring crypto assets. Many in the cryptocurrency industry have baulked at this and other instances of increasing regulatory oversight, but could this actually be the push the crypto industry needs towards mainstream adoption in the financial market?
The majority of blockchains do not have a built-in protocol to automatically capture the real-world identities of its users, and digital assets are either pseudonymous like Bitcoin, or anonymous like privacy coins. For the more libertarian-minded, this is the big draw towards cryptocurrencies in the first place, though some now view it as a weakness that is impeding the adoption of digital assets among the masses. Over 50% of Americans own stocks, but only 2% own Bitcoin, as estimated in a 2018 Wells Fargo/Gallup poll. About 1 in 4 investors in the US are intrigued by crypto assets but are reluctant to buy it in the near future considering its price volatility and uncertain legal status. There is a need for stability and security in the crypto industry, and regulations could be the key to establishing a safer and more mature environment that can benefit the industry and its stakeholders in the short and long-term.
Setting the rules in black and white
At the moment, crypto-friendly financial institutions and banks are few and far between. Established institutions are put off by the legal uncertainty surrounding virtual assets, a lack of technical knowledge, as well as the costly systems for AML/KYC that are required of them when complying with ambiguous and divergent regulations. On this point, putting in place a clearer and coordinated regulatory framework can help financial institutions categorise and understand the functions of various cryptocurrencies, effectively giving them the green light to invest in virtual assets. We can see that regulation is already affecting the industry in the slew of privacy coin delistings that show how VASPs are taking tougher measures in the move toward compliance.
It seems like any small sign of cryptocurrency’s wider adoption can trigger a substantial price jump.
Eventually, regulations like the “travel rule” will lead to a divide in crypto assets between the regulated and unregulated sides of the coin. By tying identifiable information of users to virtual assets, crypto exchanges and regulators will be better able to identify and validate legal transactions while recognising those tied to illicit activities such as money laundering or terrorism funding. Criminals and bad actors will be driven underground where their digital assets can only exist through legal ambiguity or in clear violation of the law. Unregulated assets will in time become less fungible and their value will be weakened, whereas robust regulation will allow compliant virtual assets to become increasingly stable and fungible, thereby improving their appeal to institutional and individual investors as a legitimate long-term investment rather than a short-term speculative opportunity.
Getting the price right
It seems like any small sign of cryptocurrency’s wider adoption can trigger a substantial price jump. But whether it’s Facebook’s Libra launch or China’s newly announced pro-blockchain stance, the excitement inevitably peters out, and the value of cryptocurrency drops again. A high cryptocurrency price should not be the end goal — Bitcoin’s rapid price rise in 2017 ended in a crash and massive losses for investors because of market manipulation, over-valuation, and financial scams. What cryptocurrencies need instead is a level playing field where real identities can be tied to illegal transactions, and market manipulators can be stopped and held accountable. In a regulated marketplace, individual virtual assets can be better-judged on their merits and the economic forces of supply and demand, thereby attracting a larger pool of investors who will provide liquidity and allow for a more accurate valuation of cryptocurrency’s worth.
Regulation will also make virtual asset ownership more secure, and set the stage for virtual asset custodians and owners to be more accountable in their transactions. VASPs will have the ability to reject suspicious transaction requests, stop irregular dealings in progress, or reverse transmittals after the fact if law enforcement can establish that they are tied to unlawful conduct. Lawbreakers and con artists will know that they leave a virtual trail behind them even whether their crimes are successful or not. In the long-run, increased cooperation between VASPs and financial institutions means that more sophisticated and technologically advanced security solutions can be developed for the protection of legitimate crypto users. For instance, traditional finance is more advanced in AML-compliance, and VASPs with access to this professional expertise will be better equipped to identify bad actors on their platforms.
In a regulated marketplace, individual virtual assets can be better-judged on their merits and the economic forces of supply and demand, thereby attracting a larger pool of investors who will provide liquidity and allow for a more accurate valuation of cryptocurrency’s worth.
Going the distance
It is surely only a matter of time until we have a solid regulatory framework with which crypto exchanges can operate in different markets. If there is enough coordination between regulators, VASP users will be allowed to send virtual asset transmittals to any regulatory-compliant destination in the world without needing to undergo time-consuming KYC registrations each time they open an account. A universal digital profile linked to their personal identities can instead be created and used for more efficient trading of virtual assets. With improved regulation, traders and institutional investors may be more willing to invest a larger portion of their portfolios exclusively in cryptocurrency if it offers them the same protection as physical currencies.
All in all, it is short-sighted, and ultimately futile, to rail against impending regulation of the crypto industry around the world. Increasing regulatory oversight is merely a step towards mainstream acceptance for cryptocurrencies, and there are far more benefits to outweigh the negatives in the long-run. The writing is on the wall and for crypto to keep growing as a sector, we need more than the experts and enthusiasts to get on board — we need the general public to have trust in and access to the technology. Some VASPs may be afraid that implementing strict KYC processes will hurt their businesses, driving their customers to exchanges with laxer rules. However, to go the distance and have viable businesses in the long run, it would behove VASPs to get ahead of the game and implement solutions that will allow them to be compliant with minimal disruption to their businesses.
Regulation isn’t the end of the line for the crypto industry, it’s actually the starter pistol going off. So now it is up to the industry players, big and small, to work together with regulators in addresses their biggest concerns and have a say in the direction of the industry’s future.
