Cryptocurrencies: The New Goldrush
The California Gold Rush began in 1849 at Sutter’s Mill in Coloma, California. The news of gold brought approximately 300,000 prospectors to California. Gold worth tens of billions of today’s US dollars was recovered, which led to great wealth for a few, though many who participated in the California Gold Rush earned little more than they had started with or lost everything altogether.
Recent scholarship confirms that merchants made far more money than miners during the Gold Rush.1 The wealthiest man in California during the early years of the rush was Samuel Brannan, a tireless self-promoter, shopkeeper and newspaper publisher who opened the first supply stores in Sacramento, Coloma, and other spots in the goldfields. Just as the rush began, he purchased all the prospecting supplies available in San Francisco and re-sold them at a substantial profit. Another businessman who went on to great success selling to the prospectors was Levi Strauss, who first began selling denim overalls in San Francisco in 1853.
We are witnessing that “gold rush” opportunity again, however, today the opportunity is in the cryptocurrency world. While the idea of cryptocurrencies began in the 1980’s, called cyber currencies, it wasn’t until 2008 with the introduction of Bitcoin that cryptocurrencies became popular. I believe cryptocurrency, of some type, is the future of monitory exchange, and I don’t know which cryptocurrency or currencies will finally win the cryptocurrency war. Bitcoin is currently the most referred to cryptocurrency, however, it is not the superior product in the market. There are dozens of other choices better than bitcoin. Today, it is clearly speculation to be investing significant amounts into any one cryptocurrency. The cryptocurrency that may finally win the battle may not even be a name recognized today.
Cryptocurrencies are mined using significant computing power, servers, and energy. Just like our dollar has an extensive system of banks, cryptocurrencies must have a way to be validated through security systems and exchanged in an efficient manner using blockchain technology. The industry that is being created around cryptocurrency is expanding exponentially and impacting many different areas of our lives beyond the cryptocurrency itself.
Many speculators will invest in cryptocurrencies, as back in the mid-1800’s when many struck out to stake their gold mining claim. While I know many who have invested in one cryptocurrency or another, I personally only know very few who have struck the mother lode. Like the goldrush, I believe there is far more money to be made from the companies supporting the currencies than there will be in the cryptocurrencies themselves. At Potentia, we are looking to the companies from which our client’s portfolios will benefit regardless of the outcome. Allow us to show you a different perspective on how we would invest your portfolio.
- Clay, Karen; Jones, Randall (2008). “Migrating to Riches? Evidence from the California Gold Rush”. Journal of Economic History.