Thursday, April 20, 2017

Bitcoins and Cryptocurrencies: Introduction

One of the most requested assets today in investment portfolios and by retail traders are cryptocurrencies, such as Bitcoin, Litecoin or Ethereum, digital currencies that use blockchains (which act as a notary public) to the storage of the data of your financial transactions. I include myself among the many traders who underestimated this digital currency, because he did not understand its concept and distrusted that there is no Central Bank behind it, apart from its dark origins and its exposure to cyber attacks. Today they are the currency of fashion: everyone wants to have bitcoins because of the accelerated price increase they have had since last year.


But, why should the bitcoin interest us, and how can it affect my future? I think that every trader, if he has an interest in the subject, should 'lose' 30 minutes of his life in watching the following video 'The Blockchain and Us' (includes subtitles) by Manuel Stagars, very illustrative on the subject. It does not deal with the complex technical explanation of its operability (that little or nothing interests us) but of its perspectives as a digital means of exchange and, finally, of life, in future societies. Here is his introduction.

In 2008, Satoshi Nakamoto invented bitcoin and the blockchain. For the first time in history, his invention made it possible to send money around the globe without banks, governments or any other intermediaries. The concept of the blockchain isn’t very intuitive. But still, many people believe it is a game changer. 

Economist and filmmaker Manuel Stagars portrays this exciting technology in interviews with software developers, cryptologists, researchers, entrepreneurs, consultants, VCs, authors, politicians, and futurists from the United States, Canada, Switzerland, the UK, and Australia.

The Blockchain and Us is no explainer video of the technology. It gives a view on the topic, makes it accessible and starts a conversation about its potential wider implications in a non-technical way. The film deliberately poses more questions than it answers. 







There are already futures in the currency market: there are pairs that operate the bitcoin with the $BTCUSD dollar, being, in my opinion, still reserved for knowledgeable traders of those markets, because to all the risks involved in the Forex, we must add the high bitcoin volatility. On the other hand, bitcoin has the advantage of being a currency without nationality, and therefore free of the geopolitical and economic swings of a country. As in any investment there are pros and cons ...


If, like my case, we do not operate with futures, there is the alternative of online exchange houses that allow their acquisition as any other currency, in exchange for a fee per transaction. The market governs the exchange rate. In Peru, some regional companies such as Ripio and Surbtc operate. What makes bitcoin attractive this 2017 is its price, look at its chart, today it is trading at $2,760.




In fact this wild growth brings its risks because we know the market always corrects exaggerated increases like this, even more so when you do not know with certainty the real value of this young currency. Moreover, the idea of 'bubble' round strong on Wall Street for its resemblance to past cases. Here an opinion, in the eventuality of an upcoming crash of this cryptocurrency.

And since bitcoin is not the only circulating cryptocurrency (the ethereum, litecoin or dogecoin, they all have their own particularities and protocols), this variety and competition between them is what makes this new market even more interesting. Even at a governmental level, also Putin showed interest in the ethereum, of Russian origin, and its implementation there could raise its price. For the moment, I recommend caution in this new financial sector, and always remember this word: bubble.

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