Herkimer resident David Gotman was able to turn a $500 investment in cryptocurrency into $6,000. Others have made more — and less. Gotman, 19, began researching cryptocurrency almost five years ago. Then, a little more than two years ago — after researching the legality of the currency, among other things — he dove in and has not looked back. “Cryptocurrency is the modern stock market,” he said. Gotman said investing in cryptocurrency is easy. He said all a person needs is knowledge of the currency and a cryptocurrency wallet that links to your bank account.
The Herkimer County Community College student said he is planning to continue investing in cryptocurrency and plans on selling some of the currency he has and then using that money to reinvest in other cryptocurrencies.
Bitcoin, the most popular cryptocurrency, has skyrocketed recently as more people invest in it and are making money — though experts warn of potential downfalls. And understanding what exactly cryptocurrency is can be difficult to the newcomer. Bitcoin was among the first cryptocurrencies founded — though it is not the only one. Cryptocurrency is a digital currency that is decentralized, with no central authority backing it and is used as a peer-to-peer payment system. “They are not backed by any government or legal entity,” said Mehmet Sencicek, an associate professor of economics at Utica College.
Sencicek said cryptocurrency originally was developed to be used as a method of payment, but currently is being treated as an investment — much like stocks and bonds. He said the appeal of the currency is that it is highly liquid, has a low transaction cost and can be sent almost instantaneously.
There are several ways a person can acquire bitcoins. One is by mining — which requires a user to use their computer’s processing power to solve a complex mathematical problem. Sencicek said the problems are getting harder and harder to solve and could create an issue when the problems get too hard to mine. People also can purchase bitcoins (and other cryptocurrencies) from online exchanges where it is sold like other commodities.
Gotman said he uses the website and app Coinbase and the Cryptocurrency exchange site Bittrex. He said people can spend however much they want on the various currencies, though some sites and exchanges do have rules as to how much must be purchased.
Retailers also can acquire bitcoins by accepting them as payment for their goods. Ocean Blue restaurant in Utica is one of the area establishments that accept the digital currency. Francis Pezzolanella said the restaurant has taken cryptocurrency since Thanksgiving. Ocean Blue accepts Bitcoin, Bitcoin Cash, Litecoin, and Etherum. “Most people are intrigued by it,” Pezzolanella said. The restaurant advertises the cryptocurrency use via social media, at the restaurant and on the check. All managers have the Bitpay app on their phone to facilitate the transactions.
Pezzolanella said the restaurant has handled about a dozen transactions with bitcoin and a half dozen with litecoin — with most transactions around $100. The restaurateur — who invests in cryptocurrency — is aware that with the fluctuation in price, Ocean Blue can easily be overpaid or underpaid on a given tab. “It’s a risk you take,” Pezzolanella said. Sencicek does not think cryptocurrency has been fully established as a payment option. “It hasn’t established its value yet,” he said.
The value of cryptocurrency is very fluid. Much like the stock market, it fluctuates according to outside factors. These factors can include how many people want in on the currency, what major corporations are allowing it to be used as payment — thereby adding legitimacy and making it more mainstream — and whether or not it is regulated by the government.
Sencicek said the U.S. government said it would not regulate, though that could change. South Korea, China and Russia have come out and said they would regulate cryptocurrency — which caused a recent drop in value, Sencicek said.
The fluidity of cryptocurrency doesn’t concern Gotman. He fully understands that there will be familiar patterns of prices skyrocketing and then crashing. “It wouldn’t be much of a loss if I lost it,” Gotman said of his investment.
Source: Bitcoin, cryptocurrency used as investment, purchasing tool
Contact reporter Ed Harris at 315-792-5063 or follow him on Twitter (@OD_EHarris).