The first cryptocurrency was Bitcoin (BTC) and it has generated spectacular returns to investors but it is broken.
Bitcoin has the strongest brand of all cryptocurrencies and this generates demand for the coin.
Bitcoin has a special place in the cryptocurrency universe because it is the best gateway for fiat (real money like USD or Euros). Investors who want to buy an Alt (Alternative cryptocurrency to Bitcoin) usually have to buy BTC for fiat, and then use that BTC to buy the coin they want.
The problems with Bitcoin
Top issues include,
- a fractured community that cannot agree how to move forward
- slow transactions (10 min blocks and congestion)
- high transaction fees (sometimes as much as $20)
- the network uses too much electricity (more than some African countries)
Bitcoin was the first cryptocurrency and its blockchain technology is OK but not great. If Bitcoin was a car, it would be the Model T Ford. The Bitcoin community is split into Core Developers, Miners and Users with poorly aligned interests. During 2017 they found it impossible to agree on a technical path forward and a group forked the blockchain to create Bitcoin Cash.
The future of Bitcoin
The future is already here — it’s just not very evenly distributed
Bitcoin presently has a role as a store of value like gold. No-one buys gold bullion to make dental filling, no-one buys Bitcoin to so they can purchase a coffee in Starbucks. In both cases they buy it as a store of value to hedge other assets. There are already other cryptocurrencies that actually work for buying things, for example, Dash and Bitcoin Cash.
During December 2017 we saw a bit flow of capital to Alts at the expense of Bitcoin and I expect this to continue during 2018.
So how do I hedge my Bitcoin?
To lower your exposure to the volatility of Bitcoin you can buy Alts. The best way to do this is to passively invest in a cryptocurrency index either buying a token or managing your own holdings. This site has a lot of information that will help you do this.
So will Cryptocurrencies keep going up?
Nobody knows! but the Cryptocurrency Guru is content to allocate a small proportion of his investment portfolio to this exotic asset class. By using passive investment in cryptocurrency indexes he can achieve average performance with minimum effort.