BY Mauricio Rich
Waking up at 7 a.m. and sipping a short espresso, Senior Finance major Jose Enrique Holmes signs on to his bank account and the first notification that pops up is an unexpected $10 transaction fee.
Agitated, he stands up from the chair, hits his little toe on the desk, and asks himself how and why he has been charged – again. After that, Holmes remembers he has been facing this issue for a year. He calls the bank, they tell him to call the number on the back of his card or change his password, but it does not solve the problem.
Holmes faced this scenario after transferring money from one bank to another. Expensive fees, stress and several days of waiting to receive money from other banks prevented him from purchasing shoes, clothes and medicine for him and his family on Amazon and Ebay.
There is a way to avoid unexpected, illegitimate fees and days of waiting for transactions to be completed: cryptocurrencies. These virtual currencies, now available online and through the stock market, allow users to transfer virtual money instantly and anonymously. There are no routing numbers, no ID required, no schedules and no paperwork. Users just need one unique code to transfer virtual money.
Founded anonymously in 2009, cryptocurrencies are broken down into different coins with different prices between $50 and $4,500 per single coin. Users can buy and sell an entire coin, half or even a quarter of a coin. They are free to add the amount of money that they desire. Their accounts are simply virtual wallets that collect and save coins. People who have been involved with this business have made investments and money, including Holmes.
In 2016, Cryptocoin News reported five million cryptocurrency users worldwide. In September 2017, the market capital, or total value among all cryptocurrencies, reached $170 billion. In May 2017, there were seven million users. The number increased more and more from seven million to 15 million new users in July and continues to grow. The United States, South Korea, China, the United Kingdom, Finland and Denmark host the majority of active users according to Bitcoin.com. It is estimated that one million users join the cryptocurrency world every 30 days. That means more buying, selling, and transferring coins.
“One friend recommended [I] buy cryptocurrencies to transfers money faster,” Holmes said. “The price of the first Bitcoin that I bought was $560.”
Holmes bought four entire Bitcoins when the price was around $700. Nowadays, one Bitcoin averages a price of $4,200. When the price hit $1,800, he bought three more, bringing him to a total of seven coins.
According to Coinbase, the price almost hit $5,000 this month. If Holmes sells his seven Bitcoins at that price, he would earn $35,000 directly to his bank account. The more expensive coin prices get, the more money users earn.
Not only has Holmes bought Bitcoins, he’s also bought smaller coins such as Litecoin, Ethereum and Ripple. “This is a long-term project for me, I started with $500 and now I have more than $4,000,” he said. “My goal is to keep investing as much as I can because this is the future of money.”
Victor Useche, a Financial Consultant at E. Diz Actuarial Services and Consulting in Panama and Venezuela, said that the massive growth of cryptocurrencies is driven by young adults between 19 and 25 years old.
“Older people in the financial world are accustomed to traditional stock markets and do not fully understand the adversities of cryptocurrencies,” Useche said. “Young people seek the opportunity to make money with just a couple of clicks.”
Assistant Professor of Economics at UT, Cagdas Agirdas, said that young people grew up during the internet era and that plays a major factor on who uses cryptocurrencies the most. “Young people are more open to new inventions and cryptocurrencies are quite interesting for them,” he said.
There are more than a thousand virtual coins according to Vivekanand Jayakumar, Associate Professor of Economics at UT. However, Bitcoin, Ethereum, Ripple and Litecoin are the most popular cryptocurrencies. They can all be purchased through Coinbase.com, which displays charts and prices of these coins. Bitcoin is the most expensive and its price rose from $2,000 to $4,900 between February and July of 2017. Numerous users took advantage of this growth and many of them sold and bought more Bitcoins.
“Bitcoin and Ethereum are for general population and widespread use,” Jayakumar said. “The other ones [small coins] are more created for very narrowly defined purpose.” Small cryptocurrencies are used for groups or companies as they sell and buy products among themselves, according to Jayakumar.
Jhonny Uray, Junior International Business and Entrepreneurship major, , joined the cryptocurrency world in 2015.
“I bought two entire Bitcoins when the price was around $700 two years ago,” he said. “When the price almost hit $5,000, I sold one coin and made a profit of $4,300.”
Users simply add the amount and coin that they want to own coins. For instance, Uray paid exactly $700 for one Bitcoin. He owned it until he sold it for almost $5,000. The difference between both amounts is his earnings, which go directly from Coinbase to his bank account. Everything is monitored through users’ profiles. The more people join the cryptocurrency world, the more prices increase.
Uray has already invested in other coins. Half of his earnings, he said, are to buy plane tickets as he likes to travel and to buy basketball clothes. The other half is to invest on more coins.
“I bought half of Ethereum and one entire Litecoin,” he said. “The market continues to grow and the plan is to sell again when prices rise.”
Selling coins may be useful in emergencies. Last summer, Holmes participated in a local soccer tournament that his town in Ecuador organized. He usually plays as a winger and that means running back and forth. During a hard-fought match, he was trying to cross the ball into the box.
“One defender kicked my left foot because he missed the ball,” he said. “It was painful and the game was over for me.”
Even though he did not need surgery, his ankle was injured. Holmes needed to transfer money from the United States to Ecuador through different banks. Since the bank transaction was going to last between four to five business days, he thought of a better idea.
“Bitcoin really helped to transfer coins from the US to my bank account in Ecuador and buy a pain relief that was available here [in US],” he said. “The money transferred so fast that I bought the medicine on the same day and got it five business day.”
Cryptocurrencies users look for the opportunity to make money from online platforms because of their simplicity, according to Agirdas. He believes these virtual coins will earn more power in the future.
Experts say, there are real-world downsides to these virtual coins. “Easier transactions can increase sales of companies,” Agirdas said. “That’s a major benefit. The major cost could be the declining power of US dollar which is the reserve currency internationally. If cryptocurrencies were large enough to become the international currency one day, the national debt would create more problems for the US.”
Jayakumar said that central banks and governments are willing to allow citizens to obtain and invest money using cryptocurrencies until they believe that they have to regulate them.
“There is no central authority controlling cryptocurrencies,” he said. “This system is called distributed ledger technology. They are constantly checking all the transactions and that keeps things secure.”
Useche, who is also a Cryptocurrency Specialist, said that it is unlikely that a global economy collapse may occur with the growth of cryptocurrencies. However, the collapse may happen among virtual currencies.
“Users don’t need to think too much about buying more coins. Once the price drops, more people buy coins,” he said. “If these coins disappear because of government regulation, millions of people will lose money.”
Young people are making money out of this technology and that they have a lot of resources to do it, according to Useche. “It is fascinating to see how this business grew in just two or three years. We will definitely see more coins in the future,” he said.
You can reach Mauricio Rich at firstname.lastname@example.org