Davide Demarchi*
Since November 2017 following by a price surge, which reached 2000% (from 1.000$ to 20.000$) in late December, Bitcoin and cryptocurrencies dominated the headlines all across the world. Previously associated with black markets and the deep web, in the last 2 years, cryptocurrencies have attracted a huge amount of capitals, going from 7 billion USD of total market capitalization in 2015, to almost 17 billion in 2016, and touching the all-time-high of 830 billion in December 2017. This 8 years’ constant uptrend have generated a huge hype around this market, but what are cryptocurrencies?
Bitcoin was first announced in 2008 and implemented in 2009 by someone, under a mysterious name of Satoshi Nakamoto. It was the first Peer-to-Peer electronic cash system. And the underlying technology, the blockchain, which is a distributed server in which every node (A.K.A. computer connected with the network) runs a full register of the transactions and the balances, updating in real-time. This system prevents the possibility of manipulations or being controlled by a single actor. This concept had flown under the radar of mainstream attention for 8 years, but it still created a fertile environment for programmers and developers to create new projects starting from the same ideas.
Along with Bitcoin, which is the main cryptocurrency, mostly for the fame instead of its technological superiority, many other cryptocurrencies have popped out for the last of 2 years. In many cases, those cryptocurrencies use Initial Coin Offering (ICO) to gain capitals from investors. ICO is the crypto version of an Initial Public Offering, which stocks are substituted with newly created coins or tokens. With the ICO formula, new projects were able to collect 107 million in 2016 and 1.7 billion in 2017 for their development.
But with great possibility comes great risk: as an unregulated market, any kind of behavior is possible: manipulation or pump-and-dump schemes happen every day. With over 1500 coins currently being developed, there are every kind of project: from legitimate ones like Ethereum, that rapidly became the second largest currency; to suspicious Ponzi schemes. Bitconnect is the most clamorous scheme which reached a market capitalization of almost 3 billion before it crumbled in front of 2 cease-and-desist orders from U.S. authorities and it is now facing various class actions from scammed investors.
As many observers pointed out the situation in this particular market is similar to the early 2000’s Dot-com bubble. With dozens of new coins being created every month, in many cases without clear project beneath the coins, it is really easy for newcomers to be taken by the hype and end up with the pockets full of useless coins. At the same time, it is undeniable that we are facing a modern technology with many possibilities of usages. The blockchain is being experimented by many enterprises, institutions and even governments. For example, Sierra Leone held the first elections regulated by the blockchain this year. Most of the projects we see now are still embryonal, almost certainly, some of them will become trustworthy and well-established companies in the future.
Investing in any market is risky and the possibilities to lose a part or all the investment is always there, so keep in mind the following two simple but effective recommendations: First, never invest more than what you can afford to lose; and second, do your own researches, you would not throw your money away, so do not put them into something you do not believe. And let’s hope to see you millionaires in the near future.
* Davide Demarchi is E-Power's Guest Correspondent of the Year (2018). Born in Imperia, Italy. Graduated from the University of Genoa in International Diplomatic Studies. Currently learning Chinese in National Chengchi University in Taipei. Interested in international relations, strategic studies and crypto currencies. Believes that pineapple on pizza is a blasphemy.
No comments:
Post a Comment