Before freshman Rikhil Konduru invested in Bitcoin, he had invested in the stock market. However, the staticity of the market and the need for something new, something interesting, led himto eye cryptocurrency as a viable investment. After speaking with Bitcoin enthusiast Mike Myers, Konduru purchased a miner and has been investing in Bitcoin ever since. He currently has a couple of bitcoins, keeping the money for passive investment.
“Really the only reason I got interested in [Bitcoin] is because I saw the money, and I thought the [financial] market was too saturated right now because nothing’s interesting,” Konduru said. “So I guess this is the next big thing and I’m in it.”
Bitcoin is just one of over 1,000 cryptocurrencies available on the market, but it is the biggest one to date. It has a market cap of over $200 billion, while its closest competitor, Ethereum, trails behind at a relatively measly $44 billion. To mine cryptocurrencies, investors purchase miners. Miners are physical computer that go through a blockchain, essentially a maze in which the end goal is to crack a password for a reward of cryptocurrency. The more powerful the miner, the greater its hash rate, and the more cryptocurrency it obtains. If a miner mines a block, or hits a dead end that does not lead to the correct password, it receives a small amount of cryptocurrency, but if the miner is successful in cracking the code, it will receive 12.5 bitcoins. (This rate will halve in 2020, and will continue halving until about 2110-40, when 21 million bitcoins have been issued.)
Konduru purchased a Dash miner in the peak of its popularity, as one could easily earn $70,000 to $80,000 a year just from mining. However, its popularity led to its own eventual downfall as the difficulty of mining skyrocketed, making mining with a Dash miner ultimately worthless.
“What the algorithm does in terms of Bitcoin [is] that every 2,016 passwords [miners crack], they’re going to limit the rate of change, so you can find one block every ten minutes,” Konduru said. “Because hardware advances, if you don’t adapt and go to the newest thing, then you’re most likely going to lose all of your profits and it’s gonna be a loss because you’re gonna pay for electricity [for the miner to run, as well]. That is a big risk.”
This economic risk is something that economics teacher Scott Victorine took into account when evaluating whether or not investing in Bitcoin would be worthwhile for him.
“If the price was right I definitely would, but it’s definitely one of those things where hindsight is always 20/20,” Victorine said. “You could strike gold with it or you could strike out with it. If I was gonna invest I would probably just go with a flat amount, say, $2-5 thousand dollars, and just see where it takes me, versus investing extremely heavily into it or going all in on it.”
However, the risks associated with investing in Bitcoin often pay off. Within 2017 alone, Bitcoin skyrocketed from about $1,000 in January to seven times that amount in November, doubling that amount by the next month. Konduru predicted that Bitcoin would grow to be worth $10,000 before February; it broke the $17,000 mark at the beginning of December. Some forecasters predict that one bitcoin will be worth upwards of $40,000 by mid-2020.
The value of Bitcoin is largely dependent on how much the general population trusts it as a currency, Victorine explains. He believes that Bitcoin would have to overcome a steep climb in order to become regarded on the same level as the US dollar or the euro since the usage of Bitcoin is not yet ubiquitously adapted.
“I just think one of the biggest things about money is that people have faith in it, or that they understand that there’s something to it, or that there’s a reason that they trust it,” Victorine said. “[F]or bitcoin to get to that type of level I think it would be very hard, especially on a big scale, like the euro or like the USD. … The[se countries] just have a lot more people [to trust the national currency], so I think [the relatively smaller amount of people who trust Bitcoin] would be a logistical issue for [Bitcoin].”
Konduru contrarily believes that based on the upwards trend in both the price of Bitcoin and population interested in investing, Bitcoin could likely become a mainstream currency akin to the US dollar or euro. If his prediction comes true, Konduru would likely have enough money in Bitcoin to pay off his college tuition.
“In terms of convenience, it’s way more convenient,” Konduru said. “You take [out] the middleman; banks can’t screw you over anymore. I think it has the potential [to become a mainstream currency], if people keep on investing, if people keep on trusting Bitcoin.”