Hysterical About Cryptocurrency?

April 25, 2022

Over the last few years, the finance industry has continued to grow rapidly, in part through the development of new fields and the introduction of new concepts. As gas prices continue at sky-high levels and a month of rent feels more like a down payment on a used car, people are searching for something they can actually afford. More and more people are trying to understand cryptocurrency, all while the creators themselves don’t seem to know what they created. The fact that you can create currency from thin air and value said currency based on a popularity contest is beyond me.

Satoshi Nakamoto seems generally accepted as the original creator of blockchain, but apparently, he wants his involvement to remain anonymous. I won’t tell anybody as long as you don’t. IBM helpfully describes blockchain as “a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding).” Hmm, I am glad we got that clear.

According to Forbes, blockchain can be used for tackling the refugee crisis, preventing voter fraud, and improving government efficiency. That sounds like a pretty challenging list. I am not sure blockchain will meet those lofty goals, but as you probably know, blockchain is the foundational technology of cryptocurrency, which, of course, includes Bitcoin. Amongst much hysteria, given Bitcoin’s rapid price increases (and decreases), some people have been persuaded that it is the next big thing, but have you ever thought about why do we get so gung-ho about Bitcoin and new-age money?

The Certified Financial Planner Board of Standards recently began piloting a new topic – Psychology of Financial Planning. The purpose is not to equip your advisor/financial planner to become your psychiatrist. Instead, it is all about helping advisors and planners to recognize and understand some of the softer issues which affect their clients’ financial decisions. The goal is to analyze the why behind many of our financial decisions, whether spending, saving, investing, or even buying cryptocurrency.

I have downloaded Coinbase and purchased Bitcoin to try and understand the mechanics and possibly how people get sucked into the crypto trap. After watching a range of videos, from advice from a 15-year-old to ‘how to get rich from Bitcoin in 90 days’, I realized that crypto is something anyone can try, but the outcomes are highly based on the luck of the draw.

Even though making money through investing in cryptocurrency is highly speculative, some argue that it could become a stable source of exchange for goods and services, if properly regulated. President Biden signed off on new crypto legislation related to its taxation in the $1.2 trillion bipartisan infrastructure bill late last year. With taxes should come more detailed regulations, and once those are in place, Bitcoin could move closer to the mainstream, though it remains unclear if the asset will ever be able to provide value to the broader public.

Tajaná Harrell