The Mitchell resident recently bought about a penny in a cryptocurrency and made just over $ 50,000 six months later. Bailey is one of 220 million people who use cryptocurrencies, according to recent figures from a July report on crypto.com.
โGoing into crypto was without a doubt the best decision I made with my money. I helped my friends get into it and watched them accumulate more wealth than they ever had, โsaid Bailey, who has used his earnings from cryptocurrencies to help grow his food truck business.
Cryptocurrency, in essence, is a new form of digital money that is decentralized and can be used to buy goods over the Internet and exchange money without the involvement of a bank. While there are thousands of cryptocurrencies and it continues to rise, Bitcoin has become the most popular. Since its inception in 2009, Bitcoin has risen from a penny to around $ 57,000.
Although Bailey is accumulating wealth through investment, the unregulated digital currency has not been adopted by many of the major banking institutions for multiple reasons. And that includes the Federal Reserve, the central bank of the United States.
However, that is starting to change as large banks like JPMorgan Chase and Ally Bank now provide financial investment services for some of their clients looking to take advantage of bitcoin and cryptocurrencies. JPMorgan went so far as to start its own form of cryptocurrency. Big companies like Starbucks, AT&T, and Etsy have also started accepting Bitcoin as payment for goods.
"Looking at some of these big banks going up, I think we'll see another bull run before we hit the bear market where they aren't really moving much," Bailey said. "The more money from banks and institutions we're seeing coming in now, that's why I think the crypto market is doing so well right now."
Perhaps the biggest move that Bailey says has the crypto community on notice is the City of Miami, Florida's creation of its own cryptocurrency that the mayor plans to share dividends with residents who have a "digital wallet."
As Bailey said, the cryptocurrency is "taking over."
โThe Miami token is a great movement that I think will only grow across the country. It is the wave of the future, and I am lucky to have dived into it, "he said.
Despite the growing popularity of Bitcoin and the number of financial institutions that allow cryptocurrency services, many industry leaders consider it a risky investment.
Cortrust Bank was among a handful of local banks that reported to Mitchell Republic that they do not provide any cryptocurrency services. Jeff Smith, Cortrust Bank CFO at Mitchell, said one of the main reasons banks have refrained from the cryptocurrency craze is fraudulent activity.
While Bailey and others see the decentralized aspect of cryptocurrency as a benefit that keeps the government and big banks out of an individual's money movements, Smith said it has also led to fraud schemes.
"100% of the time we see any activity through Bitcoin it is total fraud," he said.
Nonetheless, millions of people around the world haven't let that dissuade them from investing in Bitcoin, which helped push the price up to around $ 54,000, which is where it was hovering on Friday.
What makes cryptocurrency different from traditional stocks like Apple and Nike is that there is nothing to physically back it up. For example, when you invest and buy shares of a stock like Nike, you are buying shares of the assets and cash flow of the company.
As Smith put it, the only thing that drives the price of Bitcoin up is "speculation by a growing number of people buying stocks and investing in them." That's what makes it a "very risky investment," Smith said.
โIt is not a form of good monetary system. You can drive the price of gold up just because of what happens on Wall Street, and that's not a monetary system you want to deal with, โSmith said. "If the majority of the traders of a certain cryptocurrency decide that they want to exit, then it could drop almost to zero quickly because it is not backed by anything."
He pointed to the volatility of Bitcoin that it has experienced in recent months as another reason why many leaders in the banking industry question the craze of digital currencies. In May, Bitcoin plunged to around $ 30,000, marking a near 50% drop in less than a month.
The sudden drop that erased the high of roughly $ 64,000 it saw in April came after countries like China began cracking down on Bitcoin, demanding financial insights not to conduct any cryptocurrency-related business, and Tesla owner Elon Musk, stopped accepting vehicle purchases in Bitcoin citing environmental concerns. the mining process.
Although Smith and many financial institutions are moving away from cryptocurrencies, he said that the concept of digital currency has the potential to become a "legitimate" monetary system. For that to happen, Smith said the Federal Reserve would have to take the lead in adopting a cryptocurrency that is regulated through the central bank.
โEverything in our industry is moving digital. The Federal Reserve would have to lead a digital currency for most banks, especially community banks, to follow suit, โhe said.
The cryptocurrency purchase and withdrawal process looks very different from trading stocks. But Bailey said the process is pretty simple, noting that there have been a lot of misconceptions surrounding it.
"It's as simple as taking my coin to an exchange like Coinbase, and then I hit the cash withdrawal button and it converts it to US dollars," Bailey said.
Coinbase is a popular method used to buy and cash out Bitcoin, which involves creating an account with the exchange broker that allows one to deposit or buy Bitcoin.
Also, there are ATMs that convert Bitcoin to US dollars. Unlike traditional currencies such as the US dollar, the exchange rate is determined by the country's central bank, the exchange rate of the cryptocurrency depends on the demand for a respective currency.
In recent months, Bitcoin ATMs have appeared at some Mitchell businesses, such as Coborn grocery store and Freedom gas station.
However, Smith said that he has seen a lot of scams with people who have used Bitcoin ATMs.
"They put this money in the ATM and send it thinking it's legitimate, but there is a large processing fee," he said.
Since many banks still ban any cryptocurrency-related business, Bailey said that using ATMs to convert Bitcoin and other digital currencies into US dollars is a common method that people use before depositing money into the bank account.
To trade and manage cryptocurrencies, Bailey said that a popular way to do this is through the blockchain, which is a cyber database that stores an individual's cryptocurrency and records transactions.
Bailey compares Blockchain to a large cryptocurrency bank. But the key difference is that the blockchain is decentralized, which means that cryptocurrency trading can be done person-to-person without going through a third party, such as an investment banker or a company required to trade stocks.
"Crypto is here to stay, and I think we will see Bitcoin break above $ 100,000 in the near future," Bailey said.
