The Bitcoin hype continues unabated. Should I continue to ignore it?

For some of us who invest in mutual funds, gold or equities, bitcoin is not completely unheard of. Some are just getting to read about it and have been making up their minds to invest in bitcoins. Some of us are blissfully unaware of cryptocurrencies altogether and most within that group dismiss any discssion arising on bitcoin as soon as the reference is made. But should we ignore cryptocurrencies, particularly Bitcoin altogether?

History teaches us that no one remains unaffected by technological changes in the world. The die hard personal letter writers gave way to emails eventually. History is replete with instances of corporations doing brisk business folding up owing to changes in technology which they chose to ignore at their peril.

Progress is the hallmark of mankind. Sprituality, science and technology enable advancement of the human race on a daily basis. In this light cryptocurrency perhaps is the advent of new technology which is here to stay, and seep into our daily lives at a pace faster we are able to imagine.

The world is divided today on this. On the one hand we are scared to make the transition to the world of cryptocurrencies either as investors or users, and on the other the frenzy at which bitcoins are being lapped up by early investors and users is shaking our beliefs not to get involved in something we do not understand. The gravity defying surge of valuation of cryptocurrencies are making way deep into our psyche- will we get left out of the race? Are we already out of the race when one bitcoin costs way over $6k or INR 0.4 million, with these multiplying several times in 2017 itself before our own eyes?

Should we still jump in? Should we give way to the frenzy and then be a laughing stock when it comes crashing down. It would be a bit difficult to wipe that blot out of my passbook of investing in something at stratospheric levels and then grinning it away explaining to friends and family why I was foolish enough despite having the experience of witnessing some spectacular financial market crashes in my lifetime?

Well, there is no clear answer and no unqualified advice. While I write this, I never believed myself that I would see bitcoin surge to $6400 as of October 31, 2017. In fact I never believed any levels, right from $1k, 2k, 3k, and so on. However, one thing I always have, and continue to believe in. I believe that Bitcoin is here to stay. It is not a fad, it is not a bubble, it not a story spun by quick get rich operators, and it is not something that will go away.

Today everyone holds a mobile phone in their hands. Through the mobile phone they have their independence, a unique number, a unique identity through which they can be contacted by fellow human beings all across the world. That is their gateway to mankind. They use it as a calculator, as a watch, as a notepad, as their cinema and television, as their fitness app, in fact for almost everything. Most of us have shifted to credit cards and debit cards over cash a long time back, and the affinity of hard cash in the wallet is diminishing, at whatever pace you care to quantify. And now most of us are shifting to mobile wallets, administered through our smartphones. Today I use mobile wallets to pay for trivial expenses, including expenditures of a dollar or less. Not carrying gold or copper coins would have been unheard till as late as last century. Today we can only reminisce with a smile on this memory.

Consider that there is a probability, that as we have shifted slowly to and are on the verge of embracing fully a digital mode of payment, rather than carrying cash, digital currency, in some form or the other would be gaining acceptance rapidly. Then consider further whether you would like to barter your time or merchandise for bitcoins today. If you can envisage yourself accepting bitcoins for your time and effort, then the case becomes simple. All you need to do is to either start accepting bitoins directly, or converting some of your revenues into bitcoins on a weekly or monthly basis. Make yourself comfortable to start with a small percentage or value, and as you gain confidence, you might wish to increase the stake. As in every form of investment, keep a balanced portfolio, and only commit a small percentage in the initial years. Once you adopt this approach, the fluctuations would not matter to you. Just don’t think of it as a get rich quick methodology, and definitely do not get carried away with the surging prices.

The value of bitcoins is not determined by a computer program. As of now, it is not determined by market makers. Market makers will come in eventually, but being a decentralised deflationary currency, they will not have as free a run as they have with other financial instruments, where a no limit blessing comes directly from the Governments and Central bankers. Today the value of bitcoins is determined by the collective mindset of people who have put in their sweat and equity when no one believed in the concept, supported by the mindset of users and new entrants in the ecosystem, who believe that there is value in such a system, where banks and governements will not be able to manipulate at will. They would still be able to, as they have the financial muscle, but we would have a better and bigger stake in the ecosystem.

If you treat bitcoins as a store of value for your efforts, to the extent you would like to classify it such, and keep a balanced approach at all times, you would find that you have made a prudent decisions which few financial advisors would be able to guide you to. Don’t be a speculator, don’t give in to temptation, but still respect the ecosystem by being a part of it, however small. It is advisable not to ignore this entirely, even if the hype and frenzy is appearing uncalled for today.

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