Investing in cryptocurrencies is dicey. Instead, consider the underlying technology.
When “bitcoin” appeared as a clue in the New York Times Sunday crossword puzzle earlier this year (the five-letter answer was “ecoin”), it was confirmation that the cryptocurrency had officially entered the zeitgeist. Such virtual currencies use computer-generated encryption to secure and track transactions, independent of a central bank. Bitcoin made headlines last year because of its meteoric rise from $963 per bitcoin at the start of 2017 to a high of nearly $20,000 in December. This year’s news has been about bitcoin’s descent, to a low of $7,000 in February, from which it was recently on the rebound.
The craze over bitcoin and its ilk—there are more than 1,000 digital currencies, although bitcoin is the best-known and the oldest— is as mythic as its beginning. (The true identity of bitcoin’s creator or creators remains a hotly debated mystery.) Bitcoin was born in the aftermath of the financial crisis, when distrust of financial institutions was at a high, and a currency divorced from a central bank found wide appeal. The currency of choice for blackmarket buying crossed over to the mainstream with the purchase of a pizza in 2010. Techies glommed on, and by 2016, bitcoin was an investing phenomenon. Along the way, bitcoin has spawned as many skeptics as believers, while regulators grapple with how to oversee this newfangled asset and the potential for fraud that comes with it. One thing is sure: Whether bitcoin or any other cryptocurrency survives, the technology behind it is here to stay. Read on to learn more.
What can I buy with bitcoin?
This story is from the April 2018 edition of Kiplinger's Personal Finance.
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This story is from the April 2018 edition of Kiplinger's Personal Finance.
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