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Cryptocurrency Newcomers Cope With Wild Swings

"We are not it in it to become bitcoin millionaires,"

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A Bitcoin logo is shown at a Bitcoin trading store, Dec. 21, 2017. VOA

After researching digital currencies for work last year, personal finance writer J.R.

Duren hopped on his own crypto-rollercoaster.

Duren bought $5 worth of litecoin in November, and eventually purchased $400 more, mostly with his credit card. In just a few months, he experienced a rally, a crash, and a recovery, with the adrenaline highs and lows that come along.

“At first, I was freaking out,” Duren said about watching his portfolio plunge 40 percent at one point. “The precipitous drop came as a shock.”

The 39-year-old Floridian is part of the new class of crypto-investors who do not necessarily think bitcoin will replace the U.S. dollar, or that blockchain will revolutionize modern finance or that dentists should have their own currency.

ALSO READ: Here is guide to start your own cryptocurrency

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Dubbed by longtime crypto-investors as “the noobs” — online lingo for “newbies” — they are ordinary investors hopping onto the latest trend, often with little understanding of how cryptocurrency work or why they exist. Pexels

“There has been a big shift in the type of investors we have seen in crypto over the past year,” said Angela Walch, a fellow at the UCL Centre for Blockchain Technologies. “It’s shifted from a small group of techies to average Joes. I overhear conversations about cryptocurrencies everywhere, in coffee shops and airports.”

Walch and other experts cited parallels to the late-1990s, when retail investors jumped into stocks like Pets.com, a short-lived online seller of pet supplies, only to watch their wealth evaporate when the dot-com bubble burst.

Bitcoin is the best-known virtual currency but there are now more than 1,500 to choose from, according to market data website CoinMarketCap, ranging from popular coins like ether and ripple to obscure coins like dentacoin, the one intended for dentists.

Exactly how many “noobs” bought into the craze last year is unclear because each transaction is pseudonymous, meaning it is linked to a unique digital address, and few exchanges collect or share detailed information about their users.

A variety of consumer-friendly websites have made investing much easier, and online forums are now filled with posts from ordinary retail investors who were rarely spotted on the cryptocurrency pages of social news hub Reddit before.

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Reuters interviewed eight people who recently made their first foray into digital currency investing. Many were motivated by a fear of missing out on profits during what seemed like a never-ending rally last year. Pexels

ALSO READ: Is investing in Bitcoin safe? Get the basics first!

One bitcoin was worth almost $20,000 in December, up around 1,900 percent from the start of 2017. As of Friday afternoon, it was worth about $10,000 after having fallen as much as 70 percent from its peak. Other coins made even bigger gains and experienced equally dizzying drops over that time frame.

“There was that two-month period last year where all the virtual currencies kept going and up and I had a couple of friends that had invested and they had made five-figure returns,” said Michael Brown, a research analyst in New Jersey, who said he bought around $1,000 worth of ether in December.

“I got swept by the media frenzy,” he said. “You never hear stories of people losing money.”

In the weeks after Brown invested, his holdings soared as much as 75 percent and tumbled as much as 59 percent.

Buy and ‘Hodl’

Investors who got into bitcoin before its 2013 crash like to refer to themselves as “OGs,” short for “original gangsters.”

They tend to shrug off the recent downturn, arguing that cryptocurrencies will be worth much more in the future.

“As crashes go, this is one of the biggest,” said Xavier Levenfiche, who first invested in cryptocurrencies in 2011.

“But, in the grand scheme of things, it’s a hiccup on the road to greatness.”

Spooked by the sudden fall but not willing to book a loss, many investors are embracing a mantra known as “HODL.” The term stems from a misspelled post on an online forum during the cryptocurrency crash in 2013, when a user wrote he was “hodling” his bitcoin, instead of “holding.”

Mike Gnitecki, for instance, bought one bitcoin at around $18,000 in December and was sitting on a 43 percent decline as of Friday, waiting for a recovery.

“I view it as having been a fun side investment similar to a gamble,” said Gnitecki, a paramedic from Texas. “Clearly I lost some money on this particular gamble.”

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Some retail investors who went big into cryptocurrencies for the first time during the rally last year remain positive. Pexels

ALSO READ: Status of Bitcoin in India

Duren, the personal finance writer, is also holding onto his litecoin for now, though he regrets having spent $33 on credit card and exchange fees for a $405 investment.

Didi Taihuttu announced in October that he and his family had sold everything they owned — including their business, home, cars, and toys — to move to a “digital nomad” camp in Thailand.

In an interview, Taihuttu said he has no regrets. The crypto-day-trader’s portfolio is in the black, and he predicts one bitcoin will be worth between $30,000 and $50,000 by year-end.

His backup plan is to write a book and perhaps make a movie about his family’s experience.

“We are not it in it to become bitcoin millionaires,” Taihuttu said. (VOA)

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Bitcoin Slumps More than 10% as Fears of Crackdown of Cryptocurrencies Grew

Bitcoin fell 11.1% from Friday to $9,855 early on Monday, its lowest since July 2

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Bitcoin, Fear, Cryptocurrencies
FILE - Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah. VOA

Bitcoin slumped more than 10% over the weekend to a two-week low as fears of a crackdown of cryptocurrencies grew on mounting scrutiny of Facebook’s planned Libra digital coin.

Bitcoin fell 11.1% from Friday to $9,855 early on Monday, its lowest since July 2. The original cryptocurrency slumped 10.4% on Sunday alone, its second-biggest daily drop this year.

It was last up 1.3% at $10,319.

Politicians and financial regulators across the world have called for close scrutiny of Facebook’s Libra coin, with concerns ranging from consumer protection and privacy to its potential systemic risks given the social media giant’s global reach.

Bitcoin, Fear, Cryptocurrencies
Bitcoin slumped more than 10% over the weekend to a two-week low as fears of a crackdown of cryptocurrencies grew on mounting scrutiny. Pixabay

In a sign of widening U.S. attention, a proposal to prevent big technology companies from functioning as financial institutions or issuing digital currencies has been circulated for discussion by Democratic lawmakers, according to a copy of the draft legislation seen by Reuters.

U.S. President Donald Trump had last week criticized bitcoin, Libra and other cryptocurrencies, demanding that firms seek a banking charter and subject themselves to U.S. and global regulations if they wanted to “become a bank”.

Bitcoin, which initially shrugged off Trump’s Tweet, fell sharply after U.S. Federal Reserve Chairman Jerome Powell called for a halt to Facebook’s project until concerns from privacy to money laundering were addressed.

“Together they have increased the tail risk that the U.S. will look to crack down on it in some way,” said Jamie Farquhar, portfolio manager at crypto firm NKB Group in London.

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Underscoring the growing attention on Facebook’s plans, Japanese authorities have also set up a working group to look at Libra’s possible impact on monetary policy and financial regulation, government sources told Reuters.

European Central Bank policymaker Benoit Coeure is due to deliver a preliminary report on the matter at a meeting of G7 finance ministers this week in Chantilly, north of Paris.

Bitcoin climbed nearly 55% in nine days after Facebook unveiled its plans for Libra on June 18, touching an 18-month high of nearly $14,000. The project has boosted hopes among some investors that cryptocurrencies could gain wider acceptance. (IANS)