Bitcoin recently topped $30,000/bitcoin, an all-time high. Some of you may be wondering if you should buy. FWIW, here are some of my thoughts on the matter.
This should not be taken as advice or recommendation! Cryptocurrencies are highly volatile, many cryptocurrencies are run by incompetent teams, and there are innumerable thieves, con artists, scammers. You could easily lose some or all of your money!
That said, I'm very optimistic about crypocurrencies. I think, like many crypo enthusiasts, that a cryptocurrency like Bitcoin will eventually become a world currency, on par with the dollar, yen, etc. If that happens, BTC will be valued at $1+ million/bitcoin. You can read an argument for this thesis here:
https://hackernoon.com/the-case-for-the-1-million-dollar-bitcoin-1602e8840fb8
Therefore, if you believe that thesis, then it makes sense to hold until BTC reaches that price point.
Of course, many's the slip betwixt cup and lip!
Crypto is an entirely new kind of financial instrument (as of 2009), and BTC was the first. It's rare for the pioneer of a new tech to be the long term winner--newer, better tech developed with the knowledge learned from the pioneer's mistakes / shortcomings almost always displace them.
Among BTC's current weaknesses include lack of privacy, lack of fungibility, and poor scalability. And culturally, it's hard for BTC to make significant upgrades--the current stakeholders have a lot of power to stymie changes.
For example, a proposal to make a single simple change to improve BTC's scalability resulted in an acrimonious, years long war. Here's a description of the war (from the big-block side):
https://www.maxlaumeister.com/articles/the-block-size-debate-5-years-later/
(If small-blocker wants me to link to their side, please suggest a link in the comments.)
Second and third generation cryptocurrencies can make those upgrades much faster than BTC.
IMO, a cryptocurrency like Bitcoin will become a global currency equal to the dollar, and several alternative cryptocurrencies (alts) will compete at lesser--but still high--levels of adoption in a power law distribution. However, I'm not confident that BTC will be at the head of that distribution curve.
On the other hand, BTC has proved remarkably resilient, and its death has been (falsely) declared many times:
https://99bitcoins.com/bitcoin-obituaries/
It may be that BTC stakeholders will become more open to rapid change in the face of collapse of BTC's price due to the adoption of competing currencies.
In any case, my strategy is to buy the second (or third) generation cryptocurrencies that I think have corrected the deficiencies of bitcoin. Once the people who have bought Bitcoin realize that they can't spend them without revealing their purchases to the world, for example, then I think they will turn to these better coins.
There are also some utility coins/software that solve problems that were previously difficult / impossible to solve without cryptocurrency.
However, as only a relatively few number of people currently own cryptocurrencies, small changes in demand can cause big fluctuations in price. Anyone who buys cryptocurrencies must be prepared for breathtaking drops in value. Bitcoin's price, for example, has plummeted to 20-30% of its previous peak value several times in its history.
This should not be taken as advice or recommendation! Cryptocurrencies are highly volatile, many cryptocurrencies are run by incompetent teams, and there are innumerable thieves, con artists, scammers. You could easily lose some or all of your money!
That said, I'm very optimistic about crypocurrencies. I think, like many crypo enthusiasts, that a cryptocurrency like Bitcoin will eventually become a world currency, on par with the dollar, yen, etc. If that happens, BTC will be valued at $1+ million/bitcoin. You can read an argument for this thesis here:
https://hackernoon.com/the-case-for-the-1-million-dollar-bitcoin-1602e8840fb8
Therefore, if you believe that thesis, then it makes sense to hold until BTC reaches that price point.
Of course, many's the slip betwixt cup and lip!
Crypto is an entirely new kind of financial instrument (as of 2009), and BTC was the first. It's rare for the pioneer of a new tech to be the long term winner--newer, better tech developed with the knowledge learned from the pioneer's mistakes / shortcomings almost always displace them.
Among BTC's current weaknesses include lack of privacy, lack of fungibility, and poor scalability. And culturally, it's hard for BTC to make significant upgrades--the current stakeholders have a lot of power to stymie changes.
For example, a proposal to make a single simple change to improve BTC's scalability resulted in an acrimonious, years long war. Here's a description of the war (from the big-block side):
https://www.maxlaumeister.com/articles/the-block-size-debate-5-years-later/
(If small-blocker wants me to link to their side, please suggest a link in the comments.)
Second and third generation cryptocurrencies can make those upgrades much faster than BTC.
IMO, a cryptocurrency like Bitcoin will become a global currency equal to the dollar, and several alternative cryptocurrencies (alts) will compete at lesser--but still high--levels of adoption in a power law distribution. However, I'm not confident that BTC will be at the head of that distribution curve.
On the other hand, BTC has proved remarkably resilient, and its death has been (falsely) declared many times:
https://99bitcoins.com/bitcoin-obituaries/
It may be that BTC stakeholders will become more open to rapid change in the face of collapse of BTC's price due to the adoption of competing currencies.
In any case, my strategy is to buy the second (or third) generation cryptocurrencies that I think have corrected the deficiencies of bitcoin. Once the people who have bought Bitcoin realize that they can't spend them without revealing their purchases to the world, for example, then I think they will turn to these better coins.
There are also some utility coins/software that solve problems that were previously difficult / impossible to solve without cryptocurrency.
However, as only a relatively few number of people currently own cryptocurrencies, small changes in demand can cause big fluctuations in price. Anyone who buys cryptocurrencies must be prepared for breathtaking drops in value. Bitcoin's price, for example, has plummeted to 20-30% of its previous peak value several times in its history.