Crypto? or Cryptno?

I, like most of the world during lockdown, was looking to make some money. Being an all knowing university student I thought that crypto was a sure thing. Oh how wrong I was. The next couple of months would ensue into a rollercoaster of pluses and minuses. Whilst this did indeed keep me relatively entertained during lockdown it did nothing for my blood pressure.

I could never understand why cryptocurrencies were worth any money at all. Not a great thing to admit after investing... but nevertheless they were worth something. In fact, they were worth quite a lot indeed. At it's highest peak one bitcoin topped out at over $65,000. Moreover, between 1st April 2020 and 1st April 2021, the price of Bitcoin increased by 744%. So you can see why at the time I could only see the benefits: retire by 30.

So what are Cryptocurrencies?

There are thousands of cryptocurrencies out there. The most famous include: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and the comedy coin: Dogecoin (DOGE).

Cryptocurrencies are decentralized, meaning they are not controlled by any central authority such as a government or bank. Instead, they rely on complex algorithms and cryptography to regulate their creation, verification, and transaction processes. This decentralized nature also means that transactions can occur directly between individuals without the need for intermediaries such as banks or other financial institutions. However, this lack of regulation can also lead to risks such as price volatility and security concerns.

Blockchain technology also has to be mentioned in deciphering cryptocurrencies. It's a critical component to the functionality of Bitcoin and other cryptocurrencies. A blockchain is essentially an online ledger consisting of connected blocks of information. Each block contains a collection of transactions that are independently verified by each "validator" on the network. Before being confirmed, each newly generated block must be authenticated by each node on the network, making it highly challenging to counterfeit transaction records.

What have been the issues?

There have been quite a few to be honest. To begin with, while the intended design of cryptocurrencies is to distribute wealth across a decentralized network, the reality is that ownership tends to be highly concentrated. Approximately 12% of circulating bitcoin and its total value is held by just 100 addresses. Furthermore, although the blockchains themselves are secure, the off-chain repositories such as exchanges and wallets used for storing crypto-related keys, can be vulnerable to hacking.

Cryptocurrencies traded on public markets are also prone to price volatility, as evidenced by the significant fluctuations in Bitcoin's value, which soared to nearly $65,000 in November 2021 before plummeting to just over $20,000 a year and a half later. This has been the most recent major price crash in a seeming long line of crashes. Although, not long ago has started to rise again. Where this will go I think I could have a stab in the dark...

The upside?

You can potentially make a lot of money. I didn't, but you could, there are plenty of crazy success stories. Furthermore, that potential to double, triple or even quadruple by betting on a horse that seems unstoppable would be a missed opportunity to most. But that horse is about to flip over that next fence with a curtain call incoming.