Many people believe digital currencies have no real value.
One budding Wealth Chef recently wrote to ask: “Ann, what determines the value of a cryptocurrency? How can I ensure it isn’t just a fad that’s going to zero?”
I’ve been chewing this over and wondering how to respond to that very good question.
I decided to reach out to some of the teachers I’ve been studying Cryptocurrencies with over the past year and put the question to them.
I’ll tell you what they said in just a moment.
But first, if you haven’t yet secured your spot on the upcoming Cryptocurrency Wonders and Warnings free webinar, where I’ll be sharing how to benefit from the current crazy Crypto Boom and also what NOT to do, go to this link and do that immediately. Then keep an eye on your inbox for a special Crypto 101 report I’ve prepared for you to get you up to speed for the briefing. I hope to see you there.
Getting back to whether cryptocurrency is a fad…
I reached out one of my teachers who shared a story from Vatalik Buterin. In case you haven’t heard of him, he is the co-founder of Ethereum, another cryptocurrency, co-founder of Bitcoin Magazine and some even consider Vitalik Buterin the Steve Jobs of the crypto world.
Vitalik confessed he wasn’t always a fan of digital currencies.
I feel in great company. In fact, over the past five years’ cryptocurrencies have come into my world many times and until this year I’ve scoffed at them and been downright skeptical. Watching Bitcoin heading toward $10,000 makes me feel a little silly I didn’t pay attention sooner… but what is past is past and now is the time to pay attention.
So back to Vatalik…
In his own words, he shared that when he first learned about Bitcoin, the world’s most popular cryptocurrency, he thought, “It has no intrinsic value.”
He went on to explain what changed him from a nonbeliever of digital currencies to a believer… who went on to develop one of his own. He said he wrote a few articles about Bitcoin and was paid five bitcoins per article.
“I managed to earn my way up to 20 bitcoins, and then spent 8 1/2 of them and got a T-shirt out of it, so it’s like, ‘Look, 8 1/2 bitcoins obviously have real value. I got a T-shirt out of them.”
What he said next is of extreme importance…
You can yell at the market and call it stupid all you want… but at the end of the day, Bitcoin was trading back then for $3. Now, it’s trading at [over $9,000]… and people clearly are willing to pay for them.
Vitalik is right…
Here’s the truth about money: It can be anything.
Take the U.S. dollar, for example. There’s nothing backing it up— the US $ went off the gold standard in 1971.
So the dollar, and all fiat currencies – the £, the €, the Rand, really are… just a promise… an “act of faith.”
Just like the cowry sea shell which used to be used to represent an exchange / promise of a certain value – digital currency is the next evolution. It’s simply internet-based money. And like any other medium of exchange, many people around the world have decided it is money.
In other words, Vitalik was saying was that the marketplace has already accepted digital currencies. After all, people have bought Tesla cars, rented luxury villas, and bought diamond rings with Bitcoin already.
They believe they’ll be able to use digital currencies in the future to buy stuff. That alone makes it have value.
Or take gold itself as an example…
Gold demand is driven by people’s belief in it as a storehouse of value. That’s why people in India and China buy so much of it.
From a practical industrial utilization standpoint, the current price of gold (at over $1,250) makes no logical sense.
It’s gold’s status as a value holder that drives its price way above its industrial value.
It’s the same way with digital currencies.
2017 is like 1992 and the rise of the internet.
Back then, the internet was showing up on the radar of venture capitalists and forward-thinking investors. There weren’t any real consumer applications yet. But those of us who were informed on the space knew the technology would be transformational.
Then, like now, we started seeing an enormous amount of money pour into a brand-new sector.
And now, just like back then in the dot-com bubble, much of the hype and the money pouring into crypto’s will go no-where…
… BUT, some will end up being the Apples, Googles, and Amazons of the future and on the way, as this new frontier gets defined there are amazing opportunities to benefit.
And that’s why I think, within the next three years, we will see an explosion of brand-new consumer and institutional applications for cryptocurrencies and their underlying technology—the blockchain.
Just like what happened in the internet space when “go live” applications like Amazon and eBay started hitting the marketplace in 1995.
I want us Wealth Chefs to benefit by getting in on this pioneering technology now BUT getting in safely without being sucked in to the hype of the boom.
In the comments below I’d love to know…
- Do you think cryptocurrencies are a fad? Whether it’s yes or no, why do you think that?
P.S. Cryptocurrencies have proven themselves in a broader market. And their acceptance will only continue to grow.
There are around 25 million Bitcoin users. To put that number in perspective, more than 167 million people own stocks, bonds, and investment property investments.
With a potential market of tens of millions more people, I think it’s a smart bet that Bitcoin is going to go much, much higher in price…