Last year, Bitcoin led a motley pack of so-called cryptocurrencies in one of the great booms in market history, soaring over 2,000 percent to its peak. Since then, it’s led an epic bust that rivals the dot-com era stock market collapse. But there are still plenty of true believers. And as the dust settles, investors and regulators find themselves still grappling with questions first raised when Bitcoin broke into public consciousness five years ago: What exactly is it? How do imitators like Ethereum, Ripple’s XRP and Bitcoin Cash work? Should I buy it? Where do cryptocurrencies fit into the future of money? Here’s a guide for those feeling at sea in these turbulent digital waters.
Why are so many people down on Bitcoin?
You mean, why did legendary investor Warren Buffett call it "rat poison squared”? There’s a long list of reasons. Besides the massive price swings, Bitcoin and other cryptocurrencies have been connected with scams, money laundering, tax evasion, cyberthefts, exchange outages, excessive speculation and more. Risks like these may have been easier for regulators to overlook when Bitcoin and its peers sat on the far fringes of finance, but they are moving ever closer to the mainstream. The stakes are much higher now that mom-and-pop investors and Wall Street banks alike are piling in.
Who are the crypto true believers?
Here’s a short list of enthusiasts: Teenagers and hackers drawn by a disdain for authority and the libertarian aspirations behind Bitcoin’s creation. Technology geeks who believe they’re disrupting the marketplace and getting in early on the next chapter in the history of money. Financial firms and central banks that think something important will come out of all this even if Bitcoin withers. And there are also plenty of investors who aren’t true
believers but who hope to find one to sell their holdings to if crypto prices soar again.