Fi­nal Tally

Is cryp­tocur­rency still a safe bet?

Portfolio - - IN THIS ISSUE - BY JA­SON LIM

The un­der­ly­ing tech­nol­ogy that un­der­pins cryp­tocur­rency is blockchain, and with it comes a de­cen­tral­ized form of reg­u­la­tion. This has been the con­cern of many gov­ern­ments. Although China and some African coun­tries have em­braced cryp­tocur­ren­cies to a greater ex­tent, they are not cer­tain about the ben­e­fits that de­cen­tral­iza­tion of­fers against a tra­di­tional tested-and-proven cen­tral­ized sys­tem of mon­e­tary con­trol. At this stage, all eyes are on the cau­tious tread­ing of gov­ern­ments as well as cen­tral banks that are fig­ur­ing out what can and can­not be reg­u­lated. Af­ter all, be­cause the ad­min­is­tra­tion of the econ­omy still lies pri­mar­ily on a con­trol­ling en­tity, this au­thor­ity can­not al­low a cow­boy-town, law-unto-it­self sys­tem to take root. Even in the space of fin­tech pay­ments, com­pa­nies deal­ing with such trans­ac­tions can­not go alone as the pri­mary parts of de­posit, lend­ing, money cre­ation and pol­icy still be­long to a cen­tral­ized fig­ure­head. It comes down to hav­ing a sys­tem of or­der as op­posed to per­ceived chaos, and per­haps this is why ubiq­ui­tous adop­tion is tak­ing some time to take off. Al­ready the alarms are sound­ing with re­gards to bub­bles and dystopic vi­sions of waves of sui­cides from a loom­ing Great Cryp­tocur­rency Cri­sis. Per­haps the wise words of the Or­a­cle of Omaha has re­sound­ing truth: “In terms of cryp­tocur­ren­cies, gen­er­ally, I can say al­most with cer­tainty that they will come to a bad end­ing.” Some have even com­pared the Bit­coin boom to the Dutch tulip craze of 1637. With all these in play, how do we make sense of cryp­tocur­ren­cies from an in­vest­ment point of view? Well, for starters, when it comes to in­vest­ments, it all boils down to fun­da­men­tals. You will only in­vest when the fun­da­men­tals re­main sound and re­turns tan­gi­bly re­al­ized across the long-term. Cryp­tocur­ren­cies are not tan­gi­ble as­sets; they are only as good as the peo­ple who rec­og­nize them to be so. You can have a en­tire bunch of cryp­tocur­ren­cies but if the cen­tral gov­ern­ments are not rec­og­niz­ing them, all you can do is to use them as a mode of ex­change for goods and ser­vices up to a value that is deemed agree­able to both par­ties. Be­yond that, what­ever cryp­tocur­rency you are hold­ing onto does not hold any mean­ing to some­one who nei­ther rec­og­nizes nor agrees to its value. Given the ex­tremely high volatil­ity of cryp­tocur­rency value in com­par­i­son to cen­trally minted cur­ren­cies, those who are get­ting into the game at this stage are likely to be pun­ters look­ing at cash­ing out in the short term, or when­ever they can once they make a small profit. Early adopters prob­a­bly have lit­tle to lose as they took on the cryp­tocur­rency at a mar­ginal sum per unit. The sys­tem is per­haps mov­ing to­wards a day where cen­tral gov­ern­ments come to­gether to cre­ate a cen­tral ‘one-and-only rec­og­nized cryp­tocur­rency for trade and ex­change. This might just mean the killing off of ev­ery other cryp­tocur­rency that has come be­fore it. At the time of this writ­ing, Bit­coin has al­ready fallen by a whop­ping 67.5 per cent from its peak in 2017, and there is still room to go down even fur­ther. Food for thought in­deed.

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