Speculation coins the 'cryptocurrencies'

In the silence of the night, thousands of computers mint digital money. It is the gold rush of our time. The rafts have been replaced by powerful computers bent on solving impregnable algorithms. A grammar wire of programming that escapes a vein of more than 245,000 million dollars. That is the current capitalization of the Cryptomonadas. A story money but also a story that enframed the human being with his reflection. Because he speaks of creativity and technology but also of speculation and greed.

In the middle of that conversation the bitcoin tinkles. No Currency represents a lot of those two faces. It is an angry son. He was born in 2009. An year after the financial crash that would take the world to crisis decad. That historical context permeates its libertarian essence. Nobody controlled the currency. It is possible with a program of audio-visual software to edit the software. To get the bitcoins there are that resolves to series of numerical problems. And like that gold, it was designed as a scarce well: there are only 21 million. They have already extracted 16.7 million. You have a rhythm of 25 bitcoins every ten minutes. There are few and get them requires more and more time, more energy and more powerful computers. An inertia that the haleved one has the stratosphere.

In the last 12 months it has revalued more than 990% and is trading above the 8,000 dollars, its maximum so far. Although subjected to strong swings. There are days that lose 20% and others that win. Some say that it is absurd that their capitalization is 137,000 million dollars because it is not backed by anything. And there are those who question, think of Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University, "if we are not facing the biggest bubble in the world." However, others see redemption instead of guilt. "The only way to stop bitcoin is to turn off the world's Internet and leave it like this: off," says Roger Ver, known in the sector as the Jesus of bitcoin. Some hope to see the coin burn in hell and others reach the heaven of the Righteous. And there is no shortage of evangelizers. Some, unexpected.

The Chicago Stock Exchange will launch bitcoin futures at the end of the year, Thomas J. Lee - one of Wall Street's most reputable managers - argues that in 2022 the currency could reach $ 25,000, Amazon studies that it can be used in its platform and the Governor of the Central Bank of Turkey, Murat Çetinkaya, believes that if they are designed well, this type of currency contributes to financial stability. Of course for its followers it gives off the blinding brightness of the golden metal. The Jordanian economist Saifedean Ammous, who these days delivers the galleys of his book, The Bitcoin Standard, argues that this resemblance is his great virtue. "It has the ability to replicate the monetary policy of gold." He adds: "The precious metal was the best form of money in history because it was difficult to increase its offer. But bitcoin surpasses him because he has a maximum limit. "

But where some see fortitude others glimpse fragility. Jamie Dimon, president of JPMorgan Chase, the largest US bank, warned in September that he would fire "in a second" any operator that trades with bitcoins. "For two reasons: for going against the rules and for being stupid." The manager believes that this digital currency - which he describes as fraud - only serves murderers, drug dealers and people who live in places like North Korea. "Of course it started badly because it became a way to evade taxes using a virtual currency that escaped the Treasury," admits the counselor of a large Spanish bank that asks for anonymity. However, bitcoin is a prism of different voices. "I think Dimon needs to do his homework about the potential of technology. This can be misinterpreted, especially if it is disruptive. Which does not mean that it should be rejected, "says Bart Stephens, co-founder of private equity firm Blockchain Capital.

Catastrophe threat

However, as your quote swells, so does the fear of the next big bubble. Many analysts look at their screens and already read that threat in the behavior of the currency. "Bitcoin is trapped in a bubble regime between super exponential cycles oscillating permanently between peaks and valleys," says Edgar Van Tuyll, director of quantitative strategy at Pictect WM, with financial grammar. The graphics they handle reproduce the dot.com bubble of 1999 and also the oscillations of the Hang Seng index of the Hong Kong Stock Exchange during the gestation of the Asian crisis of 1997. "The bubbles are close to occur when there is something new in the economy or relatively new ", clarify in the bank UBS. And digital currencies are. But what worries is not its novelty, but its use. Bitcoin is being used as an Desperespeculative instrument. Not to pay for goods or services. The vast majority of buyers are guided by greed and memory. In the last two years the cyberdivisa has revalued 2,400%. A story too seductive to ignore. But with what end?

Professor Robert Shiller, who won the Nobel Prize in Economics in 2013 for his work on bubbles, proposes an explanation that mixes time and words. "I think what is driving the bitcoin now, as in other cases of bubbles, is its history," he explained on the US network CNBC. "It is the quality of the story that attracts all this interest, and is not necessarily sustainable." Does not matter. The characters build an addictive plot. An intelligent use of cryptography, a new currency, the promise of huge amounts of money (digital); the advent, it would seem, of a revolution. Fertile ground to listen to great stories.

"I started investing when my ex-wife asked me years ago what I had thought about at our children's university," recalls Greg Kidd, former risk manager of cryptocurrency ripple. "I told him that he had deposited 1,000 bitcoins in a university fund. I did not know what they were, so I explained it to them. "But what will happen if in the end they have no value?" He questioned. Well, I told him, boys can always go to public school ... Today they are worth enough to pay for school and more. " This epic of digital money dilutes its risks in the collective imagination and slows down its journey towards reality. "I have not seen anyone take 1,000 bitcoins and exchange them for eight million euros," jokes Jesus Palau, professor of Economics and Finance at Esade.

In addition, too often forget that it lacks legal security, is not regulated and if you steal the virtual wallet (the program where the cryptocurrencies are stored) you can not go to anyone. The teather platform suffered an attack of this nature last Tuesday. The hackers took away from their virtual wallet 26 million euros in USDT, a cryptocurrency used to change bitcoins to paper money. The theft had a history. In 2014 and 2016 hackers stormed the Mt.Gox and Bitfinex exchange offices and looted 440 million euros. "Modern software is written from millions of lines of code that no person can fully understand. That's why weaknesses in security remain hidden for years until they are suddenly used to attack companies or consumers, "says Dave Palmer, director of technology at Darktrace, a British cybersecurity firm. The casualties of this battle are frightening. Annually 90 million incidents occur and every day 400 new cracks open. Under this storm, many investors protect their currencies by storing them in devices without connection to the Network.

Mistrust, risk and loneliness coexist around a hungry currency. As the number of bitcoins decreases and their price multiplies, more electricity is needed to extract them. The Digiconomist platform reveals that the joint mining of bitcoin and ethereum (the second highest demand cyberdisk) consumes more energy than countries like Jordan, Iceland, Oman or Syria. Only bitcoin took 0.12% of the planet's electricity. In addition, for each coin mined (extracted), between 24 and 40 tons of CO2 are emitted into the atmosphere.

That voracity shows that these disruptive currencies harbor shadows as dark as basalt. "There are two misconceptions when people analyze these currencies. First, there is no shortage. Because in the market you can choose between more than a thousand. And they do not demand a very advanced technology because every week there is a new one ", explains Roberto Scholtes, director of strategy at UBS in Spain. The story and the myth make up a distorted image. Does not matter. This Holy Grail of ungraspable money creeps on the planet. The University of Cambridge calculates that between five and ten million people use cryptocurrencies. It is impossible to ensure the certainty of that fork because these currencies almost always travel anonymously. Today a bitcoin can be bought at money exchange houses, financial boutiques, ATMs and even in physical stores.

Strange offers

The Coinmarketcap platform counts more than 1,300 coins of this type. The vast majority of reduced value. It is possible to acquire CannabisCoin (yes, it is what it seems), FedoraCoin (whose anagram is the fedora hat of singer Justin Timberlake) or Environ (just has a market of 54 dollars, about 46 euros) in a few minutes through the computer. These currencies, of course, have more symbol than reality. But at his side the industry's giants are quoted. Bitcoin (137,000 million euros in capitalization), ethereum (35,000 million), bitcoin cash (24,000) and ripple (9,000). A universe that adds more than 200,000 million euros. Are you worth it? Or before they are born are dinosaurs waiting for the meteorite of its extinction? "The destiny of the cryptocurrencies will depend on a technological one always in change, of the economic space and of the political reality", predicts Garrick Hileman, researcher of the University of Cambridge. "Hundreds of coins that exist today will disappear and it is even possible that they all end up being a memory".

Find out the future of each one is to roll the dice. However, in this ecosystem where currencies no longer tinkle, bitcoin and ethereum have the greatest chance of resisting the impact. The former benefits from its high level of capitalization while its competitor feeds its destiny to the smarts contracts. Contracts that are executed by themselves. "Something that allows us to design revolutionary models," says Salvador Casquero, a professor at the Institute of Stock Market Studies (IEB). In fact, it has already demonstrated its value in banks that have to complete hundreds of complicated transactions with competitors they do not trust. It is not the only resistance. The cryptocurrency Zcash, for example, hides the identity of the sender and receiver. A power demanded. While the IOTA generates transactions in the environment of the Internet of Things.

Many of these coins would be change without the blockchain technology. The famous chain of blocks that prevents bitcoins from being duplicated or that operations are assaulted. It is the real revolution and many experts agree on the words. "The future is the blockchain! Not the bitcoin! "Exclaims Bernard Lietaer, one of the architects of the euro. "The cyberdivisa is above all a speculative tool that has copied the main characteristics (lack of transparency and speculation) of conventional money". Financial entities have backed that thinking. BBVA does not sell bitcoins, but the chain of blocks may be its great technological hope. Especially as a verification system - describes Alicia Pertusa, head of transformation of investment banking of the entity - currency transactions, syndicated loans and international payments. There is so much faith in this technology that UBS believes that its extensive applications in finance, medicine and manufacturing will add between 300,000 and 400,000 million dollars to the economy in 2027.

But this story is not just a geometry of numbers, but also an algebra of human beings. There is a gap between the speed at which the real economy and the cryptoeconomy move. The new forms of expression of society (circular economy, collaborative, barter, gift) seek a type of money that fits with their reading of life. People, mostly young people, who have suffered a lot with the crisis and who think that maybe there is a handhold. There is something generational break in all this. The president of JPMorgan -we have seen- attacked the bitcoin. But in the same presentation he admitted that his daughter had bought some time ago. "Now," he said, "he thinks he's a genius." That fracture is evident in the youngest. "Millennials are much more open to cronyism than other generations because they do not seem risky. It's logical: money has always been seen through the screen of a smartphone, "says Jason Dorsey, president of the consultancy The Center for Generational Kinetics.

Cryptocurrency is a promise of change in the slums of finance. Less costs, more speed, greater security. "Under proper regulation they could be an excellent digital financial instrument," clarifies Mario Encinar, professor of Data Science at AFI School of Finance. However, while there is no such regulation, "there is a risk that they may be used in irregular or illegal activities," says Francisco Uría, partner responsible for the financial sector of KPMG. But to constrict them to the great economic powers would be to erase their soul because for thousands of people they represent a crack where the light filters. A refuge, for example, in the face of inequality. "Digital currencies can reduce the high cost of sending money remittances abroad, which particularly impacts the poor," says Garrick Hileman, of the University of Cambridge. "In addition, the blockchain brings more transparency and reduces fraud in both the private and public sectors." The answer to a past satiation and a different vision of the future. "Bitcoin will be used first as a store of value. Like gold. Then people will decide whether or not to use it together with national currencies, "predicts Llew Claasen, general director of The Bitcoin Foundation.

The world of cryptocurrency is exciting and innovative. It is also speculative and risky. Hence, embracing or rejecting them generates so much tension. Perhaps the exit of the labyrinth transits by moving away from the noise and reflecting. Would you hire a pension plan in these digital currencies? Would you invest the money from the education of your children in bitcoins? As in Ockham's razor, the correct answer is usually the simplest.