Better Business

Better Business The Cryptocurrency Craze

By Chaim Homnick MA MBA

In 2021, Bitcoin hit a high of $68,000. This year, Bitcoin is hovering around $20,000, and the overall crypto market has tanked alongside most asset classes in the face of inflation, supply chain issues, tight fiscal policy, and global economic uncertainty. The era of free, easy money has stalled, and companies and individuals alike are cutting their budgets and sidelining their money. The crypto market has been hit especially hard, as it is a riskier asset and a speculative investment.

So, is crypto the future of money or is it simply the latest speculative craze with no substance to back up the valuations? Below is an introduction to cryptocurrencies for beginners.

What Is Cryptocurrency? The word “currency” can be a misnomer. Cryptocurrencies are digital assets typically aiming to be a medium of exchange. However, while some cryptos prioritize being a medium of exchange, others are more of a “store of value.” Most cryptocurrencies utilize blockchain technology to maintain a ledger of transactions. Another common denominator is that cryptocurrencies are generally decentralized, anonymous, and transparent. The goal of that feature is to provide an alternative to banking and governmental systems. Due to the lack of a central bank or other authority, cryptocurrencies rely on the individual members of their networks to verify transactions and “mine” for new tokens. The mining process has come under scrutiny lately because it is energy-intensive as it involves many sophisticated computers performing millions of complex calculations.

Cryptocurrencies are strictly digital so investors can acquire crypto tokens through dedicated exchanges (like Cointion is on the ledger and secure. Ethereum, the number two cryptocurrency, focuses instead on facilitating applications and smart contracts. This means that Ethereum can be used as the medium of exchange behind a digital marketplace, a blockchain-based video game, or to execute a smart contract. (A smart contract is an agreement between two people in the form of computer code. It runs on the blockchain, so they are stored on a public database and cannot

You can buy a Bored Ape NFT and make a mint, or you may lose your digital shirt.

base, Binance, or FTX) and the investor can hold them in digital wallets.

Bitcoin and Ethereum Bitcoin is the number one cryptocurrency in terms of market cap and global awareness. Only 21 million bitcoins will ever be mined, which makes it anti-inflationary, a direct critique of the way government interventions can inflate and dilute the value of the dollars its citizens hold. The blockchain technology also means that every Bitcoin transacbe changed, plus the contract can be set to execute automatically when certain criteria are met).

Currency or Asset? Cryptocurrencies seem to be more of a speculative asset than a true currency. However, the number of crypto-based transactions keeps growing. Additionally, blockchain technology, smart contracts, and other innovations may lead to increased potential applications of the cryptocurrency industry. Experts exist on both sides of the debate. Some people claim that cryptocurrencies are speculative assets with minimal use cases. Others claim that crypto technologies and blockchains will revolutionize entire industries.

Memecoins/Longshots

When it comes to “memecoins,” the goal is clearly speculative. Scammers abound and “get-rich-quick” schemes pop up everywhere. There have been several fraudulent crypto tokens and companies, and naïve buyers, lured by the promise of quick riches, can easily be burned. Dogecoin, with backing from Elon Musk and others, went from being worth fractions of a cent to nearly 70 cents at its peak. However, it steadily dropped alongside the rest of the market, bottoming out near 6 cents before a recent recovery based on Musk’s takeover of Twitter and the potential that Dogecoin is utilized on the platform. It is certainly possible that one memecoin rises above the others, but playing this end of the market is similar to playing penny stocks. Volatility is a feature, not a bug.

Most other crypto longshots are longshots for a reason. Some crypto exchanges list as many as 16,000 different coins and tokens. Most are probably garbage. Only a handful of top cryptos are gen-

NFTs and Metaverses

Alongside crypto, other digital industries have been exploding into the limelight. Non-Fungible Tokens (NFTs) are digital art. Facebook and other companies are pushing versions of a “metaverse” and are selling digital “land” in them. While there seem to be worthwhile applications and potential long-term uses of NFTs (event tickets, digital art, etc.), these are still nascent industries, and it can be difficult to evaluate the fair market price of these assets. You can buy a Bored Ape NFT and make a mint, or you may lose your digital shirt. It is hard to ascribe value to newer asset classes and digital assets.

Market Adoption

While the market has contracted, crypto adoption continues. In a bear market, less money is available, and the foolish excesses of the bull market dry up. That tends to be a good thing as empty projects fail and only assets and companies with a real foundation survive and flourish. When the global economic forecast improves, it will be interesting to see how the crypto markets recover. Will Bitcoin challenge $100,000 a coin, or will it stagnate?

One thing that is clear is that tech and financial giants are increasingly entering the crypto space, whether via partnerships or providing their investors exposure to crypto in a variety of ways. Nearly 50% of Americans own some cryptocurrency.

Cryptocurrency and blockchains

are enjoying increased adoption and innovation even as the industry contracts. While a lot of the true longshots, memecoins, and weirder digital assets may go the way of the beanie baby, the more established assets like Bitcoin and Ethereum seem to have genuine value. The post-Covid bull market that led to explosions in the value of everything

Chaim Homnick is a serial entrepreneur who owns several businesses. He also mentors small business owners. If you have questions you would like to see answered in a future column, or other feedback, email chomnick@gmail.com.

CRYPTO FUN FACTS

- The top corporate holder of Bitcoin is Grayscale Bitcoin Trust. They hold over 650,000 Bitcoin, a little over 3% of the total supply.

- The #2 corporate holder of Bitcoin is MicroStrategy. They hold over 124,000 Bitcoin.

- Bitcoin became legal tender alongside the US Dollar in El Salvador in 2021.

-There were 14 blockchain video games with over 100,000 users on desktop in the past month, per DappRadar. The #1 blockchain game based on desktop users over the past month was Alien Worlds, with over 1.2 million users.

-Coby Cotton, of the YouTube group Dude Perfect, went into space after he won a seat aboard a Blue Origin flight, sponsored by crypto collective MoonDAO.