Cryptocurrencies

My Case for Bitcoin and Other Cryptocurrencies: The Start of My Journey

September 07, 2017

I started my journey into bitcoin and other cryptocurrencies with much initial doubt and scepticism.

As a traditional finance folk, I couldn’t really grasp the concept of bitcoin. After all, bitcoin is not something I can touch and feel with my hands like gold or silver.

Neither is it legal tender backed by Governments’ gold reserves. Even though I was sceptical, I still watched closely the price of bitcoin.

bitcoin price

In 2016, the price of bitcoin was still hovering around 500 USD. In January 2017, bitcoin was hovering around 1000 USD.

Then in June 2017, it exploded to 3000 USD.

Today, as I’m writing this article, the price of bitcoin is 4500 USD, almost 9x growth in a year.

Even the recent China ban on ICOs seemed to have done little to stop the growth of the cryptocurrency market.

Is the growth of the bitcoin and cryptocurrency market really headed to the moon? 

Here’s 4 big reasons why I think the cryptocurrency party has barely started!

4 Reasons Why The Rise in Bitcoin Price is Only the Beginning!

Reason #1: Maybe people want an alternative to the current banking system.

The question of whether people still trust our current banking system, the financial institutions, central bank and governments has been raised and discussed.

Political uncertainty in different countries like the US, Brazil, UK could have caused some to lose faith in traditional currencies like USD or the Brazilian Real, and turn to alternative investments like bitcoin.

Reason #2: More countries and Governments will adopt bitcoin in time to come

Initially, when bitcoin was founded, governments were sceptical, and not sure what to do with it. There wasn’t a clear stance by many countries. Perhaps no country wants to be the first one to endorse it.

But slowly, we are seeing a number of nations coming out to support bitcoin and cryptocurrencies.

Japan has recently passed legislation and gave the green light to Bitcoin as legal method of payment. Russia also said they hoped to legalize cryptocurrencies as financial instruments in 2018. BSP, Central bank of Philippines, has also said that bitcoin will be a legal payment method.

I think in time to come, we are going to see more Governments acknowledging cryptocurrencies as a form of payment and currency. Check this out for the full list of legality of bitcoin by country

Reason #3: ICOs are the new IPOs

In the last three years, over 900 alternate coins have been created.

Remember bitcoin is just one of the many cryptocurrencies. Its market cap is 47% of the total cryptocurrency market.

bitcoin market cap

Bitcoin Market Cap is 47% of the total Market Cap of Cryptocurrencies

In the past, companies go public and raise funds from investors through Initial Public Offerings (IPOs). Capital raising via an IPO is an expensive process. Just think of the high fees paid to investment bankers, lawyers, accountants…

Today start-ups are changing the rules of the game and raising funds through Initial Coin Offerings (ICOs), bypassing the usual capital-raising process.

These start-ups will create their own virtual coins (or tokens) and issue these coins to investors for fiat or other virtual currency.

The alternative coin market is huge. There is already a league table for the top alternative coins by market cap. The top two coins currently are Bitcoin and Ethereum.

How do the alternative coins relate to bitcoin price?

Today, if investors want to invest in these start-ups and buy alternative coins, they will need to own some bitcoin and ethereum first. Bitcoin and ethereum can then be used to purchase other alternative coins at cryptocurrency exchanges like Bittrex and Poloniex.

What this means is that the more companies decide to raise funds through ICOs, the greater the adoption of bitcoin and cryptocurrencies and consequently, increase in bitcoin price.

Reason #4: Hype and Fear of Missing Out (FOMO)

Bitcoin has risen close to 1000% in the last one year, as you can see in the chart above.

Folks like me who didn’t buy into cryptocurrencies last year are starting to notice the meteoric rise of bitcoin.

And no one wants to be the only one left out of the party. (FOMO)

If you are like me, don’t worry as my gut feeling tells me that the cryptocurrency party is not over yet. Why do I say that?

Bitcoin Market Cap is currently at USD 74 Billion as of Sep 2017.

cryptocurrency market cap

Data From Marketwatch (June 2017)

But to put in perspective, Bill Gates’s networth is USD 86 Billion. The size of Apple is USD 730 Billion. The Gold Market is USD 8.2 Trillion.

My thoughts on cryptocurrencies

I know some think that cryptocurrencies is a bubble, but in my opinion, this is just the beginning. Governments are acknowledging cryptocurrencies as currency and form of payments. Even hedge funds are already investing in cryptocurrency as a form of alternative investment for diversification in their portfolios.

And that is why I think the recent ICO ban in China is not going to affect the overall long-term growth in the cryptocurrency market.

If anything, this party has only just started, and there is definitely still time to get on the bandwagon, if you havn’t done so already!

 

about author

Lee is currently pursuing a Master’s degree in Finance at INSEAD. Prior to his Master’s, he has worked for about five years in the treasury and accounting space. He graduated from SMU with a double degree in Accountancy and Finance, and is also a Chartered Accountant (Singapore). Other than building Excel spreadsheets and poring through annual reports, he spends his time reading and watching sci-fi movies.