There are around 1000 cryptocurrencies now (see this – but this is not a complete list). The capitalisation in these currencies is now nudging $100 billion.
The problem is that these are both extremely difficult to purchase, very volatile, and very risky to hold.
I started an experimental investment in 2014 using $200. It was a steep learning curve. I’ve outlined some of my learnings here.
However, there is a relationship between risk and reward, and I get a sense that more people are getting more comfortable with buying and using these currencies. By now I have learnt:
a) How to buy some of these currencies (I always use a bank or credit card, so I have an auditable record in case I need to pay tax on these purchases at a future date)
b) How to transfer from one exchange to another. That is not as hard as I had initially thought, although it is not instantaneous.
It is possible to convert the cryptocurrencies back into normal currencies using a range of methods. Some websites will give cash (at a steep commission). ANXPRO allows you to encash using a USD credit card that is linked to your cryptocurrency account. And I understand some companies actually take Bitcoin – although that’s not very common at the moment.
It is very hard to work out where this is going. But it is clear that with around $100 billion now invested in these currencies, there is very little chance that these currencies will disappear.
Currently, there are 7 billion people in the world, so an average person has invested around $14 in cryptocurrencies.
As bank accounts and stocks yield extremely poor returns for years on end, it is certain that people will incrementally move higher amounts into these currencies.
Now, as soon as more people invest, these currencies necessarily go up in value. These currencies are an exemplary lesson in monetary economics, where the true value of a currency should be what the market thinks of it.
Theoretically, one should therefore be able to take a “calculated gamble” and invest a good share of one’s savings in these currencies. Particularly if one is young and is therefore able to take more risks.
Anyway, now that I’m broadly familiar with how these currencies work, I’m comfortable taking a tiny bit of risk.
I just discovered that even Xapo allows the drawl of bitcoins in the form of USD credit card (or any other currency, subject to a minor fee). One can link the credit card to Paypal or any other method of payment, and start using Bitcoin like normal currency.