This means that there are likely to be speculative opportunities in cryptocurrencies during 2017 and into 2018 at least, either in buying, or in selling short. For example, below is a weekly chart of Bitcoin, the largest cryptocurrency, against the U.S. dollar, over the past 2 years leading up to September 2017: Note how the price has more than doubled within the past 6 weeks, and has risen by 500% over the past 5 months. The indicator at the bottom of the chart is the average volatility of the price over 4 weeks. It has been steadily rising, suggesting that volatility will probably increase, or at least maintain its existing level. Price charts of other major cryptocurrencies over the same time frame show a similar story. Compare this level of price movement to national currencies, which typically only fluctuate by maybe 15% over the course of an entire year against a basket of other currencies, and it is obvious that cryptocurrencies offer a profit opportunity that must be taken seriously.
We said at the beginning of this section that cryptocurrency is something new and potentially disruptive. The potential for disruption lies in the fact that cryptocurrency might completely replace national currencies such as the euro and the U.S. dollar as the foundation stones of the global financial system. Governments and central banks have the power to devalue their currencies, which we are all forced to use, degrading our savings, removing their ability to act as a “store of value”, and forcing us all to become speculators into our old age. If cryptocurrency was safe and fully exchangeable, who would not prefer to save their cash in cryptocurrency? Politically, cryptocurrency is a libertarian and monetarist dream, so if you like those political philosophies, you will certainly appreciate what cryptocurrencies have to offer. If national
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- Spring '16