Cryptocurrency is all the rage. From Bitcoin to Ethereum to Dogecoin, the wave of cryptocurrency interest is growing. Bitcoin ATMs have even installed in more than 130 major malls.
But, what even is cryptocurrency?
“Cryptocurrency is fiat money, essentially meaning it is money that isn’t backed by anything like gold or silver,” said Mason Steele, junior finance major. “Cryptocurrency is only worth what someone decides it to be worth.”
Adele Harrison, professor of finance, said there are unknowns in investing in cryptocurrency.
“Cryptocurrency is essentially a gamble investment,” Harrison said. “It isn’t a medium of exchange because there is no unit of value. It also isn’t controlled by the government, so important questions to be asking as an investor are, who is controlling the quantity of currency and how are they acquiring it?”
Currently, the largest cryptocurrency are Bitcoin, Ethereum and Binance Coin, according to BankRate.com.
One Bitcoin is equivalent to $38,394 USD, one Ethereum is equivalent to $2,404 USD and one Binance is equivalent to $394 USD.
The first cryptocurrency was Bitcoin, and it was invented in 2008 by an anonymous person known by the pseudonym Satoshi Nakamoto. It was used as a reward for “mining” Bitcoin, which consists of solving complex math problems that put new Bitcoin into circulation, according to Investopedia.
Cryptocurrency has become popular for low fees, potential for large profit and accessibility; however, it is not all perfect.
“There are three big issues when it comes to cryptocurrency,” Harrison said. “The first issue is the mediator. Who is issuing the cryptocurrency? Can they be trusted? The second issue is that there is no regulatory environment. The price doesn’t stay consistent and the longevity cannot be known. The last issue is whether or not it will be accepted as a type of exchange. Which places will accept cryptocurrency and which won’t?”
Zachary Nelson, senior finance major, warns against buying cryptocurrency.
“Cryptocurrency is still relatively new so it is risky,” Nelson said. “Don’t put all your money into it until there is stability, such as the government deciding to back it.”
El Salvador is so far the only country whose government has accepted Bitcoin as legal tender. This policy was enacted Sept. 7.
Many countries have banned Bitcoin completely, including Algeria, Bolivia, China, Colombia, Egypt, Indonesia, Iran, India, Iraq, Russia, Turkey, Vietnam, Nepal and
Kosovo.
While cryptocurrency is legal in the U.S., it is important to keep in mind the risks of investing.
For example, on Jan. 24, the cryptocurrency market crashed, decreasing nearly $1.5 trillion in value, as reported by Fortune magazine.
“Cryptocurrency is going to become a type of medium for exchange in the future, but as for now it follows the movement of the stock market,” Harrison said. “Values will keep going up and down. The huge recent drop was most likely due to some speculators leaving the market.”
Nelson offered advice to those interested in cryptocurrency.
“Invest in stocks before crypto so that you can learn about how everything works,” Nelson said. “We will see crypto in the future so becoming educated about investing in general is a good skill.”
Harrison also advised spectators to learn the investment market first.
“Both pros and cons should be learned about any and all investments,” Harrison said. “The technology aspect of cryptocurrency will also be seen more in the future. This isn’t a dying fad.”
Researching the stock market as well as cryptocurrency will help with staying ahead of the curve, whether or not immediately investing.
The future of cryptocurrency is ever-developing.
