CRYPTOCURRENCY – AND ANOTHER THING
Why is understanding cryptocurrency so complicated? A simple search of the word “cryptocurrency” or “digital currency” brings up a plethora of information, articles and opinion pieces from every corner of the universe. Most of the articles dwell on the technology that is behind this unfolding world of currency. Truth be told, most of us simply do not grasp technology well enough to understand as it relates to Bitcoin, Etherium, etc. In order to put this into context, let’s look at how we are surrounded by technology that we don’t understand but use it anyway.
You walk into your garage in the morning, push a button on the wall and watch the door open, step into your car, pat your pocket to confirm that your key fob is there, step on the brake pedal and push a button on the dashboard. If all of that technology worked, your car starts and you slide the gearshift into reverse and back out onto the street, making sure you watch the screen that shows the backup camera so you don’t drive over your kid’s bike. What if one of those steps doesn’t work? What do you do? Lift the hood and fix it? How many of us even know where to start? If you are like me, you now grab your cellphone, call the auto association or the dealership (or your much smarter brother-in-law) and ask for help. By the way, what is the technology behind that cell phone again? How does that work? We are inundated, if not overwhelmed, by technology everywhere.
We could go on, do you actually know how email works, how about that GPS, wifi, the internet itself, changing the clock on your microwave, hell – the microwave? The point is that we use technology all day long in every facet of our lives without knowing all the intricacies of how it works. The nerds of this world have created digital currency, just like they created GPS, the internet, etc. They are being asked to explain how it works and can do so only in their own language – a language we mere mortals have no hope of understanding. Should that prevent us from enjoying the benefits of using what they have created? Five years from now we won’t give a second thought to paying for something using whatever currency we choose and won’t turn down a payment for something in the same way. We certainly won’t be thinking about how that currency works, or gets created, or controlled, or accounted for. So, that’s our pitch for crypto currency but this series is about investing and how does the average person do that?
Digital currencies have now advanced to the point where there are several simple ways to invest through the stock exchange. It is no harder to buy some of the major currencies than it is to buy a stock. Do you remember our chapter on ETFs? Most of the major stock exchanges now offer multiple ETF’s for both Bitcoin and Etherium with more coming on stream all the time. We no longer need to understand or involve ourselves in crypto wallets, blockchains, or long and tedious passwords that might allow someone to steal our money. Search on your favorite stock exchange for an ETF that offers to mimic the price of the underlying cryptocurrency and you are ready to invest. There is a safety factor involved in using an ETF to invest because the company backing and managing it has to be certified by the exchange itself. The usual cautions need to be exercised since this is a very volatile market, especially in its infancy. You will also find common shares offered by many of the companies that provide various services to the cryptocurrency market.
The story about digital currencies is just beginning, but for the purposes of this writing, we will end with a couple of situations that we need to bring to your attention: I am sure that virtually everyone reading this has used, or at least, heard of PayPal. Recently, the Los Angeles Times interviewed its CEO, Dan Schulman, about the changes occurring in the financial markets. It is definitely worth reading.
If you are a subscriber to this site, you may remember that a few weeks ago I added an item about my friend James Renouf and an excellent offering about NFTs. You remember NFTs. They garnered so much publicity when someone sold one for $69,000,000. Well, James has created another masterpiece and this time it is about creating crypto for yourself. He is not talking about buying crypto or investing like mentioned earlier. He shows you how to earn crypto without investing any money. It is definitely worth a look.
Coming next will be a few nuggets of wisdom gleaned from many years as an investor, investment consultant and tax advisor to offer some advice on how to enter the stock market and we will include some words from a few legendary voices to keep us on track.