Cryptocurrency is Speculative Product than Investment Product- In Financial Industries,Cryptocurrency is the rising commodities in the past few years. It is quite attracting symbols that some of people are interested in cryptocurrency.
Some people bet that cryptocurrency can be future currency and will do some trading transaction using this non-centralized currency. Cryptocurrency is a virtual currency based on ledger that is decentralized (not old-fashion centralized banking currency) and its existences is secured by cryptography. This is digital form of currency or not have physically form like coins, or paper money issued by central bank in each country. The record of the transactions of cryptocurrencies is in spreadsheet or ledger. Every single transaction can be looked at this ledger or spreadsheet since the start of cryptocurrency. Furthermore, the ledger is updated in every single transaction. If you do the transaction (buy and sell) the cryptocurrency, you do the transfer of digital assets not a physical asset.
Historically, in 2009 led by the unknown and mysterious man, Satoshi Nakamoto, Cryptocurrency with commonly known as “bitcoin” has been launched and become decentralized with peer to peer (P2P). From time to time, in last decades, more products of cryptocurrencies are launched. Bitcoin (BTC) in the early, and followed by Ethereum (ETH), Litecoin (LTC), Cardano (ADA), Polkadot (DOT), Bitcoin Cash (BCH), Stellar (XLM), Dogecoin (DOGE), Binance Coin (BNB).
Like Yin and Yang philosophical concept, there are some of controversies of the birth and awake of cryptocurrency besides his positive impacts. Some of the controversy is about speculative bubble, environmental issues, and tool of illegal activities (criminals). Firstly, speculative bubble of cryptocurrency comes because the cryptocurrency has no intrinsic value behind the cryptocurrencies. The marker price is formed by absolutely demand and supply in the market. Besides, Elon Musk statement, the CEO of Tesla Inc, in receiving the cryptocurrencies in transactions of tesla but pull it back his statement again. It makes the fluctuation of the cryptocurrency.
Secondly, environmental impact of cryptocurrency looked in the operational aspects. Because bitcoin is decentralized currency and it is run with zillions of computers, or laptop. Every single transaction is verified by many computers. To do this, it needs a lot of resource/ energy / electricity if it does the mining of bitcoin. Based on some cases, some cryptocurrency miners need a lot of electric energy to do their activity. Meanwhile, controversy of cryptocurrency as illegal activities because some cryptocurrency can be used as payment for illegal or criminals’ activities like dark web and drugs transactions because the transaction of cryptocurrency can do the transaction without needing to verify the person.
Cryptocurrency is the invention of currency and some of people rely on cryptocurrency as investment portfolio. But there are some reasons that Cryptocurrency is a speculative product than investment products.
1. Cryptocurrency has no intrinsic value
The value in cryptocurrency is not measurable. The price of cryptocurrency is based on the demand and supply. The more buyer can buy in higher price, the more expensive of the price. We can’t ‘s measures the intrinsic value of cryptocurrency. It is different like stock/ shares. in stock or shares, we can calculate the price based on price / earnings per share (PER) or Price to book value ratio (PBV).
2. Cryptocurrency creates nothing
If we buy cryptocurrency, we own nothing. That is different if we invest in land, stock, and property. If we buy stock, we can get the dividend. If buy land, we then can rent it or plant it with crops so we can the money of it. Property like house, we can rent it so we can get income from renthouse.
The speculative aspect of cryptocurrency still has more important in driving the cryptocurrency. Some cases like Elon Musk statement on cryptocurrency, or some companies like Facebook, Microsoft and other about cryptocurrency can change the price drastically. It is too risky when the statement is not real and just an issue not real fact. It makes the currency go down. Therefore, cryptocurrency can go freely depend on the Mr. Markets wants without any obstacles.
4. Cryptocurrency still has no permission / allowed in most of countries
Most of countries still trust in the old-fashioned centralized currency. They still do not want alternative currencies without any permission. The stability of the value is riskier than common currencies. US Dollars, Euro, Pound sterling has more stable than cryptocurrencies so that can do to the business transaction across the nations. Finally, they principally do not want cryptocurrencies because it more vulnerable and uncontrolled fluctuation. Nowadays, just some merchant that can accept bitcoin or other cryptocurrency.
5. Cryptocurrencies vulnerable with criminals’ transactions
The transaction with cryptocurrencies without knowing our real identification can give the potential problems in one side. The potential of illegal activity or criminals can do the transactions with cryptocurrency, and it is legal. Furthermore, It is different when the centralized currency found the suspicious or crime transactions. The official or the authority can freeze the bank account number or users.
Bibliography of Cryptocurrency Is Speculative Product Than Investment Product
Frankenfield, J.2022. What Is Cryptocurrency?. Investopedia. Accessed via https://www.investopedia.com/terms/c/cryptocurrency.asp on September 9th, 2022.
Garnett,G.A,.2022.How to Invest in Cryptocurrency. Investopedia. Accessed via https://www.investopedia.com/investing-in-cryptocurrency-5215269 on September 9th, 2022.
FTC.2018.Cryptocurrency. Federal Trade Commission Consumer Advice Accessed via https://consumer.ftc.gov/node/77130 on September 9th, 2022.
Forbes. 2018.Guide To Top Cryptocurrency Exchanges. Accessed via https://www.forbes.com/sites/sarahhansen/2018/06/20/forbes-guide-to-cryptocurrency-exchanges/?sh=e3c5ab325722 on September 9th, 2022.