Bitcoin fans hold on for a very wild ride
Bitcoin has been a wild ride for those brave enough to invest.
Ankit Patil bought his first Bitcoin for $200 two years ago out of curiosity. When the cryptocurrency's value reached $800, Patil sold it to buy the motherboard, graphics card, hard drive, and other equipment necessary to mine Ethereum, another digital coin. His setup now whirs away in a corner of his apartment in The Acre.
A hedge fund associate by trade with a master's degree in corporate finance, Patil was drawn to the economics of the Bitcoin market and has spent the last two years learning about the various cryptocurrencies that have captivated tech enthusiasts, libertarians, regulators and hobbyists alike. Public interest has surged in recent weels as bitcoin reached a record valuation of $19,662 on Dec.A man uses a Bitcoin ATM in Hong Kong on Dec. 8. Below, mock Bitcoin chips are displayed at a Bitcoin trading store in Hong Kong on Dec. 21. Virtual currencies are not tied to a bank or government and allow users to spend money anonymously. They are basically lines of computer code that are digitally signed each time they are traded.
Public interest has surged
in recent weels as bitcoin reached a record valuation of $19,662 on Dec.17 then dropped to $12,617 just five days later. At the start of the year, one Bitcoin was worth just under $1,000.Depending on who you ask, cryptocurrencies are the future of money, a bubble that's about to burst, or both. "People should learn how it works because It touches on so many subjects — government, inflation, the economy," Patil said, predicting that cryptocurrencies will soon be as ubiquitous as social media platforms like Snapchat and Facebook.
To that end, he founded a Bitcoin discussion group in Lowell, which met for the first time on Dec. 23. Its members come from a variety of backgrounds and are drawn to cryptocurrencies for different reasons. For Patil, it was the economics and the opportunity to make some money on the side. Michael Connell, the owner of a video production company from Quincy, is in it purely to see an increase on investment, although he's far from betting his retirement on the technology.
"Call it a bubble, call it a scam, call it whatever, but in my lifetime I've had the stock market crash on me twice," Connell said. "I lost 30 percent on my mutual funds the first time and 60 percent the second time and I haven't heard anybody complaining about the scam we call mutual funds.A chart shows Bitcoin is closing value from Dec. 1 to Dec. 29. Bitcoin reached a record valuation of $19,662 on Dec. 17 then dropped to $12,617 just five days later.
His original investment of $1,000 has grown into $15,000. George Gaines, of Boxboro, has also seen a substantial return on investment but his interest lies more in Bitcoin's underlying technology. Blockchain is a digital technology that acts as a public ledger of transactions. In the case of Bitcoin, whenever two users make a transaction, or block, computerized "mining" systems distributed throughout the network confirm its accuracy by solving complicated mathematical problems based on the same algorithm. The block is then added to the end of the chain, which is recorded across the network.
Occasionally, and increasingly rarely,
one of those miners will solve a problem that creates a new block out of thin air, and a bitcoin is born. There is a finite number of bitcoins — 21 million — that can be mined. Blockchain has many potential applications, attracting even those investors who dismiss cryptocurrencies. The stock of Long Island Iced Tea Co., for example, rose 289 percent last week after the beverage company changed its name to Long Blockchain and announced it would begin partnering with companies using the technology.
Gaines, a serial entrepreneur who is currently working on ways to use artificial intelligence in health care settings, said he thinks blockchain could solve one of the Internet's biggest problems: verifying the accuracy of information. Investing in cryptocurrencies may help it realize that potential. "That helps the technology," he said."It's kind of amusing because the excitement and the greed fuels more interest, which fuels more technology, which solves some of the underlying problems."Ask a cryptocurrency enthusiast what he or she thinks about Bitcoin or blockchain and the conversation can go in a hundred different directions.
There are investment strategies to discuss, security precautions to share, and philosophies to expound on. The community aspect is important. One of the main criticisms of cryptocurrencies — although it's also an attraction for many users — is that they are decentralized. There is no Securities and Exchange Commission overseeing Bitcoin or a Federal Deposit Insurance Corporation to insure against loss if, for example, someone hacks a company that creates the digital wallets in which bitcoins are stored and steals thousands of customer passwords.
The future of cryptocurrencies is therefore heavily dependent on the technologies and communities that grow around them. Patil and other members of the new Lowell Bitcoin group hope their collaboration will make them safer, individually, and more valuable, collectively. "There's so much happening in this field, you need someone to talk to," Patil said. "When you get in, you have to be educated."