If you follow my blog and Telegram channel, you know I am not a big fan of “investing” in Bitcoin. Many people consider Bitcoin as a get rich scheme, but to me, Bitcoin is not exactly an investment (for now) or even a currency. It is a collectable. It is a “token” that proves that we live in this crazy era of digital disruption, and I want to be part of it. Maybe the value will go up or maybe it will become worthless one day, it doesn’t matter to me.
Additional Reading: Is Bitcoin a good long term investment?
On the contrary to many people’s beliefs, cryptocurrency is a difficult subject to grasp. It is a combination of two complex subjects, computing and finance. So it is indeed “rocket science”. And things are changing fast. Today, I will update you on the latest development and how I look at the future of Bitcoin.
I will try to simplify most of the technical details and so this article is for people who are relatively new to cryptocurrencies.
Bitcoin is your first step towards the world of cryptocurrency
When Bitcoin was “going to the moon” in Feb., many people imagined Bitcoin was a way to get rich quickly. It was hard to have a rational discussion with people while any conservative estimation of the future of Bitcoin would be seen as non-futuristic.
In my article earlier in the year, I pointed out some misperceptions about Bitcoin.
- People who made serious money in Bitcoin are either just lucky or they had the courage, determination and faith that most people cannot endure.
- When Bitcoin becomes the mainstream, the future expected return will diminish.
- Blockchain technology and cryptocurrency are here to stay, but the future of Bitcoin is unknown.
- The “next big thing” comes and goes, most hypes are just a blip when you look back.
- For Bitcoin or any cryptocurrency to be a “future currency”, the value of the coin must be stable. Crypto for Tesla was just hype.
- Nobody is bigger than the regulator. You can’t #defi or challenge the sovereignty of a country’s financial system.
Fast forward to now. Many things have changed.
- Bitcoin lost half of its value high of US$64,000 to US$32,000 and then rebounded to US$45,000 level.
- More and more crypto scams are tapping on people’s ignorance and curiosity of Cryptos.
- Tesla “suspended vehicle purchases using Bitcoin” in May
- Elon Musk broke up with Bitcoin, citing environmental concerns.
- Ethereum’s trading volume has surpassed Bitcoin in August in Coinbase.
- Cryptocurrency faces a growing legal crackdown globally. The latest news is that MAS recently joined other regulators to crackdown on Binance, which is one of the largest crypto exchanges.
As you can see, most of the things I predicted have happened, maybe even faster than I thought. But this doesn’t mean you should ignore cryptocurrency. In fact, now is a better time to look at this subject as more reliable and transparent information is available.
Dunning Kruger effect of Bitcoin and Cryptocurrency
You probably can tell that although I am not an advocate for cryptocurrency, yet I have paid a lot of attention to this area. As I said earlier, the “hype” about cryptocurrency is due to people’s ignorance of two complex subjects: computing and finance.
I talked about the Dunning Kruger effect in my past articles. Computing and finance are two very interesting areas. It is one of the few areas where people can feel they know a lot when they don’t know what they don’t know.
Nobody will claim that they can launch a rocket or do a neural surgery operation after one week’s training, but many believe they can drive through the minefield of cryptocurrency after taking an online course or watching some youtube videos or reading blog articles.
I started programming (BASIC, PASCAL, C, C+) when I was 10 years old and I graduated with a computer science degree. And I know the simplest way to beat “Deep Blue” (an IBM computer that beat the world chess campaign) is to unplug its power. Sounds ridiculous? This probably also explains my numbness to Bitcoin fever.
People often talk about disruptive technology but underestimate the influence of the ones who pull the strings: the visionaries, investors, speculators, scammers and regulators.
When you step into the world of cryptocurrency, you will start to see the world from a different perspective. For example:
- How does the money system work?
- Why are people talking about government defaults?
- What do these terminologies mean: Hash Rate, Mining, Private Key, Wallet, Address, Fiat On-ramp, etc.?
- What is the difference between storing your Bitcoin in the exchange or in “cold storage”.
The more you dig, the more you will discover. And the less stupid things you will do.
Seeing crypto beyond trading
Cryptocurrency is just an application of blockchain technology. Cryptocurrency is popular because it is related to something close to our hearts, money!
Despite many overnight millionaire stories you may have heard, the monster growth of cryptocurrency might be over. Even if Bitcoin rises from $50,000 to $100,000, it is only double. I think the multi-bagger return of a $1 investment to a $50,000 gain is over.
However, crypto helped the world understand blockchain technology better. And there are tons of other opportunities that await.
In Geoffrey Moore’s book, “Crossing the Chasm”, he said that while innovation was the right tool to reach the small group of early adopters and opinion leaders, it was insufficient to reach the masses. This is because the masses don’t want something new, they want something that works:
- Early adopters are thrilled by the “new”. They seek innovation.
- Everyone else is wary of failure. They seek trust.
I think cryptocurrency has helped blockchain technology reach the stage of “the chasm”. At some point in the future, everybody will be on board this journey. But it may not be what many people have envisioned today.
For example, the #defi move didn’t shake the sovereign currency but accelerated China’s move to e-CNY, which is a digital version of the fiat currency issued by the PBOC and is legal tender. And PBOC remains mum on whether blockchain is used in the system.
At the same time, blockchain will not only impact the financial industry but other areas such as manufacturing, energy, healthcare and many other industries as well.
And when it “works”, investment opportunities will arise.
I recommend you take a look at these Blockchain use cases and your mind will be blown away.
Let me recap…
If you have always been curious about Bitcoin or other cryptocurrencies, there is no harm if you want to dive deeper into this topic. But you need to approach it with the right mindset.
Don’t think about crypto as a get rich scheme or imagine that you will get multi-bagger investment returns in the short term. Try to spend some time to understand the mechanics and technologies behind it.
I think the ones who made serious money are not the crypto investors but the ones who support the ecosystem, such as the miners, exchanges, online courses, etc. Look for investment or business opportunities beyond trading crypto.
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Please note that cryptocurrencies and crypto exchanges are not regulated in Singapore and this article reflects my personal opinion and it is not financial advice. The sign up links in the article are referral links. This advertisement has not been reviewed by the Monetary Authority of Singapore. Please read the terms and conditions before you sign up.
Personally, I have applied for the True Cashback card as a cash rebate is the most straightforward reward and I don’t need to keep track.
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