For many years, Bitcoin has been this illusive term we have all heard but knew nothing about. So what is it?
Bitcoin is the world’s largest digital currency that was created in 2009 by a mysterious person or persons that go by the name of Satoshi Nakamoto.
It is a cryptocurrency that is not backed by any banks, has no physical coin, but promises lower transaction fees than traditional online payment forms and is not operated by a centralized authority.
Despite its growing popularity, Bitcoin and cryptocurrencies alike are viewed with doubt and mistrust among stock brokers and traditional investors. However, Bitcoin has paved the way for thousands of new cryptocurrencies, or altcoins, to be bought and sold all over the world.
Just one year after its inception, Bitcoin had reached $.39. Today, the cryptocurrency is worth over a rather stable $37,000. In Feb. 2021, Bitcoin reached an all-time high of $63,000, according to Coinmetrics.
“This is really good and really important for the industry,” Marcus Swanepoel, CEO and co-founder of London-based cryptocurrency platform Luno, told CNBC. “It’s going to increase the trust and transparency in our industry.”
Millennial Take Over
Today, the cryptocurrency market has skyrocketed and cultivated a new generation of digital investors.
An online poll reported that people 18 to 34 years of age were three times more likely to have familiarity with Bitcoin as compared to those over 65 and twice as likely as those between 50 to 64 years old.
Research shows that younger investors are more likely to use an app to trade rather than traditional methods.
Lisa Kramer, a professor of finance at the University of Toronto and an expert in investor behavior said it was possible that younger investors may be more drawn to a technology-based investment like bitcoin than their older counterparts.
“This new generation of investors maybe hasn’t experienced the financial crisis of 2007 and 2008. They also haven’t experienced the internet boom of the late ’90s, and the subsequent crash of 2000,” Kramer said.
Everett Rogers’ diffusion of innovations theory states that innovators and early adopters of new technology are usually urban, educated and young, which is why the main cryptocurrency demographic falls under the age of 34.
Millenials rely on Youtube and investing apps to help research future investments, and a Financial Conduct Authority study showed that 78% claim to rely on “gut instinct and rules of thumb” to know when to buy and sell.
The research also showed that 59% of those investing in crypto admitted they may not have the means to withstand a significant financial loss.
“What we see is a great deal of volatility, a great deal of what looks like sentiment-driven price changes,” Kramer said. “And so it would be foolhardy for anybody to invest 100% of their portfolio in cryptocurrencies and hope that this is going to provide a reliable nest egg in the future.”
Despite its volatility, cryptocurrency has gained recent trust and has found itself in the portfolios of many fortune 500 hundred companies as well as high profile CEOs. As a result, since cryptocurrency has acquired such strong roots in the market, it now follows its own metric and does not abide by the stock market at a 1:1 ratio.
According to the Crypto Research Report, Bitcoin could reach $397,000 by 2030. With growing confidence in the digital currency market, we will see investors of any age be able to profit from and adopt the new wave of fin-tech.
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