Bitcoin gripped the investing world in 2017, and its price increased by roughly 500 percent. In December 2017, the cryptocurrency hit a peak of almost $20,000. Since then, digital coins have lost $500 billion in value. On Feb. 5, the biggest virtual currency sank to $6,933.
How might we analyze Bitcoin’s impact going forward? BizNews spoke to Hemang Subramanian, assistant professor in the Department of Information Systems and Business Analytics, to examine the risks and value.
What is Bitcoin?
Bitcoin is a cryptocurrency and worldwide payment system. Instead of banks mediating trust amongst the parties involved in a transaction, a set of computer nodes enable these peer to peer transactions. Special nodes called miners confirm and verify transactions using cryptographic algorithms and store a record of all transactions, in an ever growing ledger known as the “blockchain.”
Are Bitcoin and other cryptocurrencies valuable?
The entire net worth of all cryptocurrencies today is still smaller than that of the Top 10 most valuable companies by market capitalization. Actually, the richest man can buy almost every other cryptocurrency other than Bitcoin and Ethereum entirely with his own wealth. He can probably buy a huge number of Bitcoin and Ethereum as well.
What are the major risk factors of investing in cryptocurrencies?
exchanges. Some people find it exciting because the price has risen abnormally high in the past 3 years. Some people find this volatility in prices extremely discomforting.
The risk factors are that this is a class of asset with very little government oversight. Many times these markets are rife with manipulation. For instance, the same person using different accounts to buy and sell the same cryptocurrency so as to artificially inflate the price, or sell to make a profit. More recently, a lot of fraudulent behavior has been detected, and money laundering instances have been found.
Want to know more about Bitcoin and cryptocurrencies? Read the Q&A at BizNews.fiu.edu.