If you read the news, you’re probably aware of the enigmatic cryptocurrency market. Since Bitcoin was created in 2009, the rise, fall, and rise again of it and similar digital currencies has been widely reported in financial news. Despite this proliferation, for most people cryptocurrencies remain an excessively complex field. To help clarify the topic I sat down with Jake Williams, a UEA graduate of Economics who, since graduating, has invested in several different kinds of cryptocurrency.
I decided the best place to start was at the beginning, and so asked Williams to take me through his process for investing in cryptocurrencies. His portfolio includes Ripple, Cardano and Stellar, which are typically referred to as “alt-coins”. He told me “in order to buy “alt-coins” you need to purchase Bitcoin or Ethereum. To purchase these currencies you need to register on an exchange and verify with a proof of I.D.” However not all exchanges are equal. He continued “different exchanges require different levels of proofs, some [may also require] proof of address.” The biggest cryptocurrency exchanges are currently Bitfinex and coinone.
I asked Williams about the relation between the news reports about the volatility of cryptocurrencies, and the reality of the market. He affirmed “the crypto market is incredibly volatile compared to traditional asset classes,” and referring to the recent rise and fall in the market cap he said “this level of volatility is generally too high for most investors to consider as a viable option in their portfolios.” He lamented on the fact that “most media sources do not really provide coverage on the basic fundamentals but rather focus on the wide price movements of the market,” which he suggests is the reason for the fact people are “quite dismissive” of the concept of cryptocurrencies.
Williams told me he is optimistic for the future of cryptocurrencies, “Blockchain Technology [the technology that cryptocurrencies use] is superior to the current options available today,” which he links to a growing sense of agency in owning currency, “as a society we are generally moving away from cash based transactions, and cryptocurrencies will become the only method in which an individual will be able to actually own their own money without storing it in a centralised banking system.”
Before leaving, I asked Williams if he had any advice for those thinking of investing in cryptocurrencies. He said one should “make sure you understand what and who it is you are investing in; you need to read whitepapers and road maps,” and also “look for coins with future potential when it comes to partnerships with large companies,”. He referred me to a recent BBC video about distributed ledger technology for people who want to become more informed on the subject.
However Williams’ main piece of advice was to “only invest money that you are willing to burn. Crypto is incredibly volatile, I have had days where my portfolio has lost 30% of its value”. This response reflects the extreme fickle nature of the currencies. In November of last year the market cap was at $184bn, and rose dramatically to a peak of $825bn in early January of this year, after which it collapsed dramatically to only $314bn. During the collapse the top post on the cryptocurrency subreddit of Reddit was a link to the U.S. National Suicide Prevention Lifeline.
It has been shown time and time again that cryptocurrency is a strange beast, but as Williams says “it is perfectly possible for any individual to get started by reading the basics.” With the required research and a tentative approach, perhaps cryptocurrencies are accessible to all.