Introduction to Cryptocurrencies

A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units.

It all started 2009 with the release of the Bitcoin whitepaper, a proposition for a decentralized network.

While Bitcoin tries to resemble digital gold other cryptocurrencies evolved to serve different use cases like being “digital cash” (for example Litecoin, Bitcoin Cash, Dash, Monero…).
Other cryptocurrencies go a step further and implement so called “smart contracts” which intend to digitally facilitate, verify, or enforce the negotiation or performance of a contract (Ethereum, NEO, EOS…).

Why do we believe Cryptocurrencies?

10 years have passed since 2009 but cryptocurrencies are still in an early stage.
The Marketcap of Bitcoin according to Coinmarketcap is around 115 Billion USD at the time of writing (Feb 2019).
This may sound much, but in the world of finance and compared to other assets like Gold (7 Trillion Marketcap) it’s just a fractal.

With the climbing adoption of cryptocurrencies over the last couple of years there’s a rise in price aswell, and the developement just started.
It’s no surprise that some of the smartest visionaries believe that Bitcoin will reach a value of 100,000 USD per coin and above.

What experts say?

$250,000 by 2022 for bitcoin […] This Is Bigger Than The Internet.
– Tim Draper at the 2018 Crypto Finance Conference in Switzerland.

Tim Draper is an American venture capital investor, and in 1985, the founder of the firm that would become Draper Fisher Jurvetson (DFJ).[2] He also founded Draper Associates and Draper University. In July 2014, Draper received wide coverage[3] for his purchase at a US Marshals Service auction of seized bitcoins from the Silk Road marketplace website.

So if you look at a $100 billion market cap today […] we think that there’s a potential appreciation of 30 to 40 times because you look at the gold market today, it’s a $7 trillion market. And so a lot of people are starting to see that, they recognize the store of value properties. So we think regardless of the price moves in the last few weeks, it’s still a very underappreciated asset.
– Winkelvoss twins in February 2018 at the CNBC-hosted chat at the Milken Institute’s MENA Summit.

The Winklevoss twins famously settled a dispute with Facebook founder Mark Zuckerberg in 2008 over the claim that he stole the idea for the social network from them. They are now heavily involved in the cryptoworld and were credited with becoming the first bitcoin billionaires.

A more recent prediction by Michael Novogratz

By the end of the first quarter [of 2019], we will take out $10,000. And after that, we will go back to new highs — to $20,000 or more.
– Michael Novogratz at CNBC September 2018

Michael Novogratz is an ex-hedge fund manager, formerly of the investment firm Fortress Investment Group.[1] He was ranked a billionaire by Forbes in 2007 and 2008.
Prior to joining Fortress, he was a partner at Goldman Sachs where he spent much time abroad including leadership roles in Asia and Latin America. Nowadays he is the CEO of investment firm Galaxy Digital.

Last but not least the famous prediction by John McAfee you probably heared about:

When I predicted Bitcoin at $500,000 by the end of 2020, it used a model that predicted $5,000 at the end of 2017. BTC has accelerated much faster than my model assumptions. I now predict Bircoin at $1 million by the end of 2020. I will still eat my dick if wrong.
– John McAfee via Twitter

John McAfee is a British-American computer programmer and businessman. He founded the software company McAfee Associates in 1987 and ran it until 1994, when he resigned from the company. McAfee’s wealth peaked in 2007 at $100 million.

The Reasoning

There are a lot of arguments to support these predictions:

  • Bitcoin is either worth nothing or a lot.
  • Bitcoin doesn’t have any inflation. There’s a fixed amount of 21 Million coins.
  • Imagine Hedge Funds, Millionaires… diversity 1% of their wealth into Bitcoin. There’s not enough Bitcoins for every Millinaire to own 1 coin.
  • Millions are being invested into the infrastructure by people that are certainly smarter than you and me. People that have no need to take such a large risk if they don’t believe it will pay off big time.
  • Bitcoin can’t be stopped. You need to kill the internet to stop Bitcoin.
  • Bitcoin is the first decentralized form of payment without any central point of failure in human history.

Frankly there are a lot of noisy opponents of Bitcoin like Warren Buffet:

In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending … When it happens or how or anything else I don’t know.

Everybody has it’s own agenda and motives to promote or dislike Bitcoin, but the bottom line is:
Bitcoin doesn’t need “Warren Buffet”.
Imagine 1% of the world population would invests into Bitcoin because:

  • they believe in it’s value.
  • their local currency is higly inflationary.
  • they don’t want their money to be confiscatable.

No wonder Bitcoin has been one of the best performing assets since it’s launch in 2009.
From a couple of cent per coin to $3400 in Feb 2019 shows that Bitcoin is here to stay and that it’s probably worth a lot.

History repeats itself

30 years ago nobody used credit cards.
Do these words sounds familiar?

“it’s not safe”… “i don’t like it”… “it’s complicated”…

Nowadays everybody uses credit cards, and we believe the same will happen to Cryptocurrencies in the future.
But despite good fundamentals and reasons, nothing goes up (or down) forever. A year ago Bitcoin was worth about 20.000 USD a coin. Compared to todays price it’s a decline of 85%!

It’s not the first time Bitcoin experienced such a sharp decline.
For example in June 2011 price reached as high as $32 per coin before tumbling all the way down to $2 in November.
In late 2013 the price was nearing $1200 per coin to drop to $150 by Januray 2015.
It’s a very volatile asset, but the bottom line is it recovered every time, and now is probably a good time to scale in while it’s cheap.

Opportunities for you

You probably heared people say “i wished i invested in Amazon” one year, two years, 5 years ago. And people didn’t because it’s already “high” in value.
Now it’s the most valueable company in the world.

Set yourself a limit. Invest what you can afford to lose, an amount that doesn’t bother you if it all goes down the tubes.
Even if it’s just $100. Give yourself a reason to follow the space and be curious about the future developement.
If everything goes bad you lose $100, an amount that’s not life-changing.
If it goes well it can become life-changing money.
Don’t miss out on the next Amazon, Google or Facebook.

Follow our guide on how to buy Cryptocurrencies and Bitcoin.
How to buy Bitcoin

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