My Thoughts on Crypto Currencies

I am not investing in any crypto currency. The thought has crossed my mind, but I am a bit too risk adverse to get into that. I do not invest heavily in stocks either. I was asked by a friend about my thoughts on thoughts on crypto currencies. I had not planned on doing a blog post, but decided I might as well. These are my off the cuff thoughts about crypto currencies, as I understand them.

While I think crypto currencies can make some add to the wealth of some, is a bit too volatile for anybody to seriously get involved in investing. This is for a few of different reasons.

The first is that it takes a lot of computing power to be able to mine cryptocurrency. Not just like running a single computer all the time, at its full maximum, but instead large server farms that consume more power than some entire power stations can output. You would need that much power to be able to mine enough currency to make it worthwhile, unless you have a lot of capital to throw at mining coins.

The second is that countries are already starting to regulate it, which in some respects is a good thing, but it may cause panic and a sell off, meaning some could lose a substantial amount of money. It may also mean that being able to convert crypto currency to another currency may be limited.

Third, let us presume that one does invest, and you decide to sell. Right now for some exchanges it can take a few days to actually perform the sell the coin, which, given the violability, can lead to wild fluctuations when it does come to selling. Meaning that you could lose money if the value of the coin is lower than the time you wanted to sell.

The fourth reason is that there are an ever growing number of crypto currencies that are emerging, and until the overall market shrinks, in terms of number of coins, it will be hard to determine where, and when, to invest. For those who are more prone to take risks, this is actually a good thing, as they can invest early, and possibly make a huge profit. At the same time though, you could stand to lose everything you invested. Whether that is from a coin going bust, or whether its from something else, which leads to the next point.

The fifth item, is the lack of backing. While it can be argued that the American dollar is not really backed by anything physical, like gold, it is still backed by the word of the U.S. Government, no matter how dubious that may be. Crypto coins, as of right now, are not really backed by any type of security for their value like real-world currencies are. So this is a problem.

Lastly, also on the topic of security, but in a different nature, crypto coins are ripe for theft. The big crypto coin exchanges are currently prime targets for thieves. Some of this is due to the exchanges’ lack of security. If a thief can cause the currency stored in one’s wallet and transfer that value to their own wallet. Thereby causing loss for many, through no fault of their own, but through the negligence of another entity in whom they trusted their information.

As to whether crypto coins will become an actual currency in the future has yet to be determined.. I do think that the block-chain technology, upon which crypto-currency is based, will actually be more useful to more people; even if they do not use the technology directly.

Those are my thoughts on crypto currencies, as it stands now. Even with all of that, there is still a small part of me that is kicking myself for not trying to mine a couple of bitcoins back when it was brand new. Alas, that seems to be my lot in life.