The general rule of thumb for high-net worth investors is to diversify your portfolio, and look to push 10 - 20% of your overall portfolio value into non-traditional, or alternative investments. This is typically a step that presents a much higher level of risk, but in most cases, over the long term, can deliver a higher level of reward too!
Cryptocurrency has emerged as an alternative investment rich in promise and for all intent and purposes, a less risky option than usual suspects such as wine, stamps and art as investment pieces. (Although there's certainly nothing wrong with a valuable bottle of wine or 6 tucked away in your bar, now is there!)
We believe that Bitcoin will continue to grow in popularity as an alternative investment, and rightly so. There are a number of positive attributes sitting in its corner. Below we outline just a few of the reasons cryptocurrency is a viable investment vehicle and one to be considered to grow your future wealth.
The Blockchain is the heartbeat of every cryptocurrency out there. It is the protocol that drives the open-source peer-to-peer network allowing the monetary decentralisation. The Bitcoin Blockchain, for example, is based on the validity of the "proof of work" which is administered into a public ledger, it is transparent to any user. It provides the unique characteristics of double-spend avoidance, decentralisation, pseudonymous transactions and superior security that differentiates the Bitcoin protocol from other cryptocurrencies. The decentralised nature of the Blockchain is even working its way into other utilities such as smart contracts used in law and even protecting art from plagiarism.
Bitcoin is secured by military-grade cryptography. In layman terms, it’s pretty darn secure and generally 'unbreakable'! Despite user error being its primary downfall, for example; cryptocurrency wallet files that store the necessary private keys can be accidentally deleted, lost or even stolen (much like physical fiat cash stored in a digital form).
Globally, the network of Bitcoin mining computers is 250 times more powerful than the world's top 500 supercomputers...combined. Therefore rendering computational processing threats “breaking” the network unconceivable.
The constant innovational capacity of the open source characteristic is the secret to future proofing cryptocurrency. As protocols are entirely open source, any individual can access and review the protocol that underpins the network and develop improvements to suggest for adoption by the community. This encourages continuous innovation and progression within the cryptocurrency community and its applications of use. In essence, the protocol itself continually sustains and improves the technology, therefore resisting any future computational processing threats. You can find the complete Bitcoin protocol in the following white paper.
Unlike current forms of currency that are held within traditional banking systems and governed by political processes, the bitcoin network is completely decentralised. Therefore, advantageous, as bitcoins aren’t susceptible to third-party risk. With current and past examples of the Greek and Cyprian economic crisis, citizens have flocked to gold and bitcoin as a measure of protection from the hands of the government. As Bitcoin provides those citizens with the freedom and surety that their finances will remain their own and will not become prey to political corruption or economic collapse.
Scarcity is the key characteristic associated with value. Even Aristotle proclaimed that for something to have monetary or intrinsic value it should be limited. And bitcoin is just that, with a finite number of 21 million bitcoins only ever to be available (currently there are roughly 14 million bitcoin readily available or “mined”). As bitcoins may only be mined and never produced (as most fiat governmental monies are minted), the bitcoin economy is deflationary by design, thus associating an increase in monetary value over time, which is great news for any investor. Many even proclaim the comparison of Bitcoin to digital gold!
Now taking into account that Bitcoin has a predictable rate of issuance (currently 25 bitcoins are “mined” roughly every 10 mins) and the total number of bitcoins is finite, this suggests that the the supply and demand will be inversed. Meaning that, as the supply decreases (as every 4 years the quantity of bitcoins mined every 10 mins will be halved the demand over time will exceed the available supply, economically increasing the value of each bitcoin.
There are currently 2.5 billion adults in the world today that are unbanked, mostly due to geographical restrictions and poverty. Cryptocurrency is far more accessible to these individuals opposed to traditional banking systems, as cryptocurrency provides an entirely mobile personal bank to the user via a cryptocurrency wallet. Allowing the user to store and transact monetary value easily and freely without any central control or restrictions.
There are only about 21 countries that have access to fully established high-level banking systems and processes, favouring them and excluding less fortunate countries from certain services and market opportunities. The remarkable fact is that the number of individuals with mobile devices far outweigh the number of individuals with bank accounts. With cryptocurrency, existing mobile devices can be transformed into a personalised bank account for the user.
That technology will indefinitely change the future of the world by giving a hand up to poverty-stricken individuals with no prior access to such services and empower them to change their lives by participating in the global economy. What this will be doing is unifying the global currency, breaking barriers and leveling the playing field for individuals and economies alike.
Cryptocurrency enables the user to trade across borders with minimal to no transactional fees. It is a global currency and, therefore, no global exchange is needed for foreign trade to occur. This dramatically advances the market environment in which we operate. Business owners and consumers choice will expand ten-fold and thus will arise new business ventures never previously imagined.
Cryptocurrency, in essence, will assist and encourage international trade (exports and imports) to flourish due to the ease of exchange. Thus eliminating exchange rates and negligible transactions fees.
You're pseudonymous on the Bitcoin network; only your key will be visible to other bitcoiners on the blockchain to verify the transactional process. Pseudonymity may be misunderstood as a means to fraudulent actions although this factor rather protects the user’s identity against online fraudulence.
While Bitcoin transactions are public and transparent, the identity of the individual making the payment remains private.
Cryptocurrency is moving the power of money from governments to individual capacity. Decentralising this power will have a great impact on the world as we know it. In essence, cryptocurrency will be ridding financial networks from manipulation and the interference of corrupt political powers.
With the Blockchain having explosive influential aspects on almost all financial and non-financial sectors of business, it's only time before it will be operative in every operation of day-to-day consumers lives.