My first delve into cryptocurrencies

The first and most obvious thing I need to do is, ask myself, as someone who keeps up with Arstechnica, with The Register, who saw Bitcoin at 1 dollar each, then 4, then 15, then 90, then 600, then 1000…………… Why the HELL was I so risk averse on this one?

Bitcoin is scary. People ask a lot of the same kind of questions when it comes to Bitcoin. Questions such as “what if the bubble bursts” or “what if it drops to 0”. They say thing like “It’s not money if I can’t see it”, or that it’s not “trustworthy” like money in their bank account.

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The thing about FIAT is that it’s no more real than Bitcoin. Infact it’s less real. Quantitative Easing isn’t about printing lots of new, physical, money. It’s simply deciding one day that more money exists. The only value of modern currency is what we place in it. It isn’t real. If everyone in the UK attempted to draw the money they hold out of their current account at the same time, the country would immediately bankrupt. See: Greece.

The money we spend with every day, the money that pays Amazon for this server, is not in any way backed by a physical legitimate sum of money. The money we think we exists does not. The value we place on the money we have is arbitrary.

Blockchain based Cryptocurrency exists in a much more physical way than the majority of the dollars and pounds we have today. It has an address. It has a private key. It is a legitimate commodity. The value we place on any commodity should be limited by its rarety, and it’s value set based on the demand we have for said commodity.

As such, with just 22m physical addresses available and a limited blockchain, there is a very very real and obvious rarety to Bitcoin. Consider that 70% of the world’s Bitcoin has already been mined, and given that Japan is now accepting it quite widely, that more and more ATMs begin to accept it, that Tesla is considering accepting it, that  has gone from 100k subscribers to just under half a million in the past 3 months, and the demand is clearly increasing far in excess of supply.

This leads, Fork or no Fork, to an increase in value – and it seems to me we’ve now reached a tipping point.

To come back to my introduction, I found out about Crypto super early. I always prioritised other, pointless things. I considered spending a small bonus on Crypto once. Just about £1000. This, invested at a value of 0.25 BTC to the dollar and an at the time very enjoyable 1.7  dollars to the pound would have given me 425 Bitcoin

Or 3.5 million dollars at today’s rate of just over $8000 USD per coin (22nd Nov 2017).

So I got in. I’m in the game. Late but I’m in.

It’s easy enough to get started.

  1. Register on Coinbase,
  2. add some dollars via international bank transfer,
  3. purchase some Bitcoin.

In my base, 0.2 entire Bitcoins! Woohoo.

What’s shocking is, having gotten lucky enough to buy after reasonably large dip owing to concern over Segwit2x, a planned fork of the coin, I bought that 0.2 coins at 5800 dollars a coin, or indeed 1200 dollars for my 0.2. coins

Being now at an ATH at time of writing (All time high), I have ‘earnt’ 40%, nearly 500 dollars, in a week, since investing.

Of question, of course, is where the ‘bubble’ will end. Bitcoin is not without it’s problems, slow acknowledgement times and high transaction fees means the currency isn’t really in a position to replace fiat day to day right now, as the transaction fee is likely more than the cup of coffee you might want to pay for. This, in fact, was the major rationale for Segwit2x and Bitcoin Cash before it, Forks aimed at increasing the blockchain allowing for lower complexity of transactions, lowering the fee and increasing the acknowledgement performance.

It’s almost impossible to accurately predict using current time-slice based pricing models owning to how open it is as a market to external influence. Patrick Bucqet wrote an interesting paper trying, which brings some confidence that the market won’t “collapse”, but the data in predicting future value is either too volatile, or perhaps we just miss a bunch of the variables…

But Bitcoin keeps winning out. It’s marketable, and it’s not going anywhere soon. Parabolic curve analysis has shown the trajectory Bitcoin is on, and though the curve is now being pushed and we’re in somewhat ‘untested’ waters, the predictions are remarkable:

Complexity of mining new coins now is roughly proportional to the demand/value of existing coins, and as the complexity increases exponentially, so does the value.

It is quite possible we’ll see 1 BTC reach the dizzy heights of $250,000.

Why not?

Of course – withdrawing that amount of cash from the exchanges is going to be a whole new world. Banks will try to prevent it. The money floating around in Cryptocurrency will not be equivalenced in fiat. How will we get out ‘real’ money. Or, will the markets have accepted BTC as payment. Will fiat itself be coming to an end? Could BTC be the new Gold? So many questions.

Who knows. But what’s clear to me is – as is often said, the best time to buy Bitcoin was last year (Dohhhhhhhhhh). The second best time is now.

I’m happy to be asset rich and cash poor for now. These kind of cash flow issues are absolutely worth the possible gains. I just wish I could buy more coin. Even 2 Bitcoins at today’s value (8000 a pop) could, conservatively, end up being worth $200,000 by 2021. And If I’d bought them a year ago, the 425 coins would be running to a cool 8 million.

The final consideration is securing the coins of course. Exchanges can’t be trusted. Not your key, not your coin. So setting up a wallet is the required next step. You trust your bank with the deeds to your house. Do you trust a shady third party with your security and your future?

I for one have gone for a Hardware Wallet, which I’ll be administering via a Chrome extension in a Tails host environment. I’ll even connect up a vpn before doing anything. Why? If Crypto becomes as big as it might, I’m going to be paranoid. Identity theft, man in the middle attacks and basic malware in the brave new world could replace pretty much all existing Cybercrime, and if crypto, not fiat, bycomes defacto, become a major angle for terrorism also.

Securing my wallet is my problem, and mistakes are my mistakes. The keys are my keys. I don’t trust other people to do this for me and nor should you.

And my Seed is definitely not written down at any address you’d find by WHOIS’ing my domain or by breaking into any of my laptops, either.

But this, is why this area is still ‘scary’ to the masses. The majority see PKI as a black art, or something that someone provides to you. Those that know what a private key even is, are dying out whilst providers give one click certification for your website, and tell you it’s not for you to worry about. A lot of these terms are alien, and one mistake in a transaction can see you lose it all. These things are true, ish, and ARE a concern for mainstream adoption of Crypto, but it’s these infantile issues that also give us an opportunity to invest and ride the wave – straight to the moon – if we get in now, before the masses are prepared, willing, or enabled to join us. Or do it a year ago. But otherwise now. For god sake now.

So – buy some Bitcoin. Even  0.01 of a coin! Even if these peak values are out,  wildly, we definitely aren’t at the peak now. I’d suggest get in, immediately, with anything you can afford to lose. And years from now, I’m looking forward to re-reading this post to see if I was right or wrong… Be it from the seat of my Lambo, or perhaps the same coffee shop I’m writing this from today…

I just wished I’d stopped to engage with the subject earlier.