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Should you buy Cryptocurrencies?

Everyone has a view on cryptocurrency. Some think it’s a scam, some are cautiously interested, and some are ardent advocates. The internet will tell you you can get rich overnight from crypto. There are also some very well-known investors who have publicly denounced cryptocurrencies. So what’s the reality? And what should you do?

The reality is that some people have indeed made profits from buying and trading cryptocurrency. If you look at the graph of the price of the most common cryptocurrencies it is clear that the price has risen several-fold over several years. Of course for every buyer there is a seller, and some of those sellers have regretted selling when the price rose later. Some of those buyers have also bought at price peaks, and regretted it when the price of their shiny new cryptocurrency dropped. What is also clear from these charts is that the price is volatile, sometimes moving more than 20% in a short period of time.

Bitcoin as Cash

Doing some research into the origins of cryptocurrency is illuminating, as the Bitcoin White Paper (the document outlining the objectives and mechanisms of the first cryptocurrency) clearly stated that Bitcoin is intended as ‘electronic cash’. The explicit objective was to design a system that would make it easy for people to pay for things digitally. In other words Bitcoin was intended to be a tool to facilitate real commerce. The cryptocurrency ‘coin’ itself was originally designed as a mechanism to reward the computers that process transactions for maintaining the network.

So do cryptocurrencies have intrinsic value, and are they backed by anything? The simple answer is there is no guarantee or ultimate backing asset. In itself that is not unusual, as most assets are similarly not backed by a guarantee. The true value (not price) of something is the degree to which it is useful, and Bitcoin was designed as a system to enable digital transactions. The price of the shares of a major company are not guaranteed in any way, and only tenuously ‘backed’ by the revenues that company earns, and these companies can also collapse. Even ‘hard’ assets like gold and silver have very limited actual physical use. Governments promise us they guarantee the value of their notes and coins, but these guarantees are backed by their ability to raise taxes and to manage the economy successfully. Inflation erodes the real value of such fiat money every year. The prices of all assets are actually determined by our collective belief at any point in time that they are valuable.

Centbee and Bitcoin SV

The startup that Lorien Gamaroff and I started in 2016, Centbee, provides customers around the world with a place to keep their BitcoinSV. We built a user-friendly, intuitive app that allows them to view their BitcoinSV balance, receive BitcoinSV from other people, and send BitcoinSV to other people. In some countries we also enable customers to top-up (i.e. buy) BitcoinSV, and also enabled ways to spend their BitcoinSV on necessities like electricity, airtime, data, food, home appliances and entertainment like streaming TV and gaming credits. Centbee does not provide advice as to whether customers should buy or sell BitcoinSV, we provide an app that makes BitcoinSV useful.

Owning Crypto

So — should you buy (or sell) cryptocurrency? The simple answer is that people should be saving for their retirement and for unforeseen emergencies. Some people have enough disposable income and the risk appetite to invest in growth assets. Each person’s circumstances are different, and it is wise to do research into what is appropriate for you, and to get professional advice for higher-risk assets or larger amounts. Centbee is focused on the use of BitcoinSV as ‘cash’, and not as a speculative investment.

We do advise people to be very careful of hype and promises of instant wealth. There are businesses and people who exploit the excitement about cryptocurrency to operate investment scams. We advise customers to be wary of such people, regardless of the asset or technology. Cryptocurrencies are not currently defined as a ‘financial security’ in South Africa. There are many other assets that do not require registration as financial products, including art, vehicles and houses. Even though BitcoinSV is not registered as a financial security, it is still legal to own and use. The current regulatory stance in South Africa is that citizens may buy any cryptocurrencies, store them, and pay for goods and services with them. Regulators are busy developing guidelines and policies that will help people distinguish between scams and well-run businesses that are licensed and operate with integrity. We look forward to these steps, where ordinary people can feel safe using BitcoinSV.

Angus Brown

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