We are in the throes of another get-rich-quick frenzy that surely will make some people rich and others chumps.
Fans of bitcoin contend that it will revolutionize the world of digital currency, taking the place of old-world stuff like dollar bills as a way to pay and be paid. But, at the moment, bitcoin is getting more attention because some people are trading it like an investment that’s going to make them sloppy rich. (As in dollars rich; not bitcoin rich.)
Which is why I called a metro Atlanta guy who is a bitcoin insider and CEO.
Stephen Pair said he first bought bitcoin for $1.10 a piece. Now, almost seven years later, bitcoin is trading for something north of $15,000 when I checked recently.
How’s that for getting your greed juices flowing?
It can’t last. Right?
“I keep expecting a sharp pull back,” Pair told me.
“We’ve been through five or six bubbles before. I keep thinking any minute now we are going to have another substantial drop and everybody writes off bitcoin again.”
Pair, who is 46, co-founded BitPay, an Alpharetta-based company that claims to be the world’s largest payments processors for bitcoin transactions. His customers include companies like Microsoft, which lets people use bitcoin to pay online for Xbox games.
As bitcoin prices spike, digital currency attracts more attention. Which, Pair said, convinces more people to try bitcoin. Which creates more business for BitPay.
But Pair told me he’s been cautioning friends who ask about investing in digital currency. (There are many kinds of cryptocurrency; bitcoin is just the one that’s best known.)
“Think about it the way you think about a high-tech growth stock in the very early days of the company’s formation,” he said. “It is very high risk.”
“People get very excited, and they have this fear of missing out, and they stop thinking logically and they start doing things that are not smart with their investments.”
Pair told me the last time he bought bitcoin it was priced at less than $100 each. He cashed some out this summer. Still, he told me he thinks a variety of digital currencies will become widely used, and that whatever particular versions win out could be valued at $500,000 to more than $1 million each.
A million dollars?
There’s a lot that’s unnerving about digital currencies. The mechanics of how it works behind the scenes makes it pretty much the most confusing form of currency on Earth. I’m still working through the details, but know that bitcoin are produced by anyone anywhere using computers to solve certain complex math problems. I’d attempt to lay it out here in more detail, but it’s already hurting my head. Bitcoin isn’t controlled by any government or centralized entity. The idea for bitcoin stems from a mysterious someone or someones using the name Satoshi Nakamoto. The currency is all virtual. And it can be used anonymously, which makes it a go-to choice for illicit online transactions.
Jamie Dimon, the CEO of JPMorgan Chase, has said people who buy bitcoin are “stupid” and will “pay the price for it someday,” according to CNBC.
But it’s hard to write off digital dreams as being too far-fetched. Other difficult-to-fathom technologies have become part of our lives. Most people haven’t got a clue what the “cloud” is, but that’s where they’ve stashed the family photos.
And we’re already prepped for digital money. Cold, hard cash has long been giving way to debit cards, credit cards and smartphone transactions.
There are hurdles for bitcoin, though.
It’s apparently kind of a pain to actually buy some as operators of exchanges try to verify you are who you say you are. Then there are security steps users need to take to make sure their bitcoin is secure.
“It’s still not as user friendly and robust as it could be,” Pair told me.
Meanwhile, fees tied to completing bitcoin transactions have been ballooning as bitcoin use grows. Once a penny or less per transaction, the fees have climbed to average more than the equivalent of $5 per transaction, with spikes in the average soaring to more than $20 in recent days.
So it doesn’t seem like it would be worth it to use bitcoin for relatively small transactions.
Some of BitPay’s customers are pushing to instead accept different cryptocurrencies with lower costs. And Steam, a popular gaming platform, recently stopped accepting bitcoin altogether because of both soaring fees and extreme price volatility.
So let me get this straight: bitcoin right now is so volatile that we really don’t have any clue what it will be worth next week. And there are costs to spend bitcoin money.
Cover your ears. I think a bubble’s about to pop.