The Value of Cryptocurrency

By David Ford

Bitcoin is a virtual currency or “cryptocurrency” controlled by a network of users. Since the coin isn’t financially backed by banks or the federal government, it can become volatile.

“What is Bitcoin,” an article written by Brian Martucci of Moneycrashers.com, explained Bitcoins’ relatively odd birth, shrouded in mystery.

“The first public record of Bitcoin dates back to October 2008, when a pseudonymous person or organization dubbed Satoshi Nakamoto published a white paper with technical outlines for a new, decentralized cryptocurrency,” Martucci said.

When Bitcoin first started, each coin’s overall worth was extremely low. During the first few years of this virtual currency, much of it was used to facilitate illegal activity.

Martucci said the purchase of illegal drugs through the infamous Silk Road was a major purpose of early Bitcoin use.

Michael Baker, a Youngstown State University business student, said he first learned about Bitcoin in 2011 from his family, but held off their investments until the company solidified its legitimacy.

“I learned about Bitcoin around 2011 when discussing the dark web with my brother and cousin,” Baker said. “When I first learned about Bitcoin, it was more so used for illegal means and because I had no real use for it, I didn’t invest.”

Baker’s cousin convinced him to invest small amounts of cash with Bitcoin, which eventually doubled and tripled.

“I really started to invest once I realized the opportunity ahead. I had planned to invest in something because I wanted to start thinking about my financial future after college,” Baker said. “I chose Bitcoin because it was and still is in a very early stage and because of this I saw the potential.”

Baker said Bitcoin is very much still in its developmental stage, which means it’s susceptible to massive value swings.

“I do think Bitcoin will be beneficial because of the technology involved with it,” Baker said. “However, with that being said, there are a lot of other project coins that have the potential to make more of an impact on the cryptocurrency world and even some that could make a real world impact.”

Despite his success, Baker cautioned prospective investors.

“If you want to invest in cryptocurrency, you must be very careful because the money could be gone before you know it,” Baker said.

Tod Porter, chair of the economics department, said an individual’s current financial situation dictates investment activity.

“People who invest in stocks should view these investments as long-term plans, for retirement and so forth,” Porter said.

According to Porter, the younger someone starts investing, the better off they’ll be; however, he cautioned to research trends and the legitimacy of a company beforehand.

Hunter Miller, a YSU business and finance student, said Bitcoin acts as though a bubble burst will be the inevitable outcome.

“I’m against investing in Bitcoin, because yeah, the returns are great right now, but when the bubble bursts, it’ll be worth absolutely nothing,” he said.

Miller said he is against investing money in Bitcoin, but said thousands of people are currently “mining it as we speak.”

Miller compared Bitcoin to currency used by YSU.

“It’s basically like using Pete’s Points,” Miller said. “Sure, there’s a monetary backing behind it, but you can only use it in like six places. So, unless the places expand to 12, then 24, it’s not really an applicable financial tool.”

Huaiyu Peter Chen, an associate professor of finance, recommended YSU students to invest in diversified low-cost index funds, if investing interests them.

On the other hand, Chen said investing is a strong word when referring to the virtual currency market.

“Putting money in virtual currency is gambling and speculation, not investing,” Chen said.

Chen said he believes the stock market is a much more viable investment opportunity because the economy will continue to grow.

“For YSU students, they should use a dollar average strategy to invest in a well-diversified low-cost index fund based on their risk tolerance,” Chen said.

 

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