Let's talk money: Students get on board with Bitcoin

By Hannah Sievert | March 21, 2018 4:31pm
Several students at the University of Portland have invested in Bitcoin, a type of crypto currency that many people throughout the world have been investing in since 2009.
Media Credit: Annika Gordon / The Beacon

Emahn Hajarizadeh, a junior operations and technology management major, first heard about Bitcoin from his brother. He had been having some success with it — investing and making a good return — so Hajarizadeh took a chance and bought a full Bitcoin last August for $3,000. He sold the Bitcoin in November, when Bitcoin was at a record high. Its worth had climbed to a price of $6,000.

Hajarizadeh took the money he made and decided to continue investing in Bitcoin and other cryptocurrencies, like Ethereum and Litecoin.

As of March 20, Bitcoin’s worth hovers around $8,800, but this number is volatile, plunging some days and skyrocketing the next. The value of Bitcoin plunged in early February from $10,000 to $6,000, before rising to a high again at $11,000 in early March. Some UP students have gotten on board with investing in Bitcoin, and they now have to decide whether to sell or hold out as the price changes with their investments — in some cases, all of their savings — reasoning that it will pay off in the long run.

Today, many people are investing in cryptocurrencies, but when Bitcoin started in 2009, almost no one knew what it was. If you decided to invest $100 in Bitcoin in 2011 — when, in January, Bitcoin was worth 30 cents — today, that investment would be worth around 3.5 million dollars

Many early investors are now millionaires and billionaires. The Winklevoss Twins, made famous for their lawsuit against Mark Zuckerberg for the idea of Facebook, used their $65 million settlement with Zuckerberg to invest in Bitcoin in 2013. Today, their investments are reportedly worth around $1.3 billion. 

Bitcoin was once the currency for those who wanted to purchase things on the black market without being detected, such as fake IDs or drugs. Transactions with cryptocurrencies like Bitcoin can’t be tracked by the government because of the technology it is traded on, called Blockchain Technology.

But now, some people see cryptocurrencies as a new way to get rich fast. Last October, Coinbase, the leading app to buy and sell cryptocurrencies, had 11.7 million accounts — more users than Charles Schwab has active stock brokerage accounts.

Bitcoin's worth is currently on a decline which means that some UP students investing in the crypto currency are going to have to decide whether to sell or hold out through the decline.
by Annika Gordon / The Beacon

UP students get on board with Bitcoin

With any rags to riches story, like early investors who are now living in crypto castles, people around the world are getting interested in crypto investing. Harrison Kasper, a sophomore psychology major, invested two-thirds of his savings into cryptocurrencies last November after he researched it for a few weeks. Instead of a savings account, he said, he has Coinbase — the most popular app where you can trade and invest Bitcoin and other cryptocurrencies. 

“I’m kind of late to the game,” Kasper said. “You have to get into it for at least a year to feel like you know something about it. I still feel like I’m lost all the time. I don’t know when to invest or pull out. My friend has been doing it for years, and he told me you should probably leave your investments in there and only keep investing for two to three years.”

Kasper invested most of his savings: around $1,500. When Bitcoin’s worth crashed in February, Kasper was back to where he started at around $1,500.

“At one point I almost made $1000, so in a year I think I could make three times that, four times that,” he said. “The market I feel like is going to constantly increase, especially as skepticism dies down. I worry that it’ll crash and not come up again, or that it dies out entirely, but I don’t think that’ll happen.”

But some students can’t see the appeal. Ally Mueller, a senior accounting major, hasn’t invested in cryptocurrencies and doesn’t plan on it, although she has friends who invest and knows about blockchain technology from classes.

“I’m a pretty risk-averse person, and the fact that they’re so volatile makes me feel more hesitant to invest in them,” she said.

“Digital Gold”

Cryptocurrencies came to the scene in 2009 when pseudonymous developer Satoshi Nakamoto created a new kind of technology called blockchain, which allows users to electronically invest money into a cryptocurrency. 

Users can invest in cryptocurrencies through apps, the most popular being Coinbase. On Coinbase, you can check your investments in Bitcoin, Litecoin and Ethereum, and invest and pull money based on your investment strategy.

Bitcoin has been called “digital gold,” but when it started in 2011, it was worth less than a dollar. As of March 20, one bitcoin is worth around $8,800. Someone can invest any amount of money into the Bitcoin platform; an investor doesn’t have to buy one full bitcoin to invest. 

What makes cryptocurrencies so volatile is that their worth changes based on how many people are buying it. The U.S. dollar gets its worth from the Federal Reserve, a central bank that stands behind the value of the U.S. dollar. Because the U.S. bank is seen as reputable and the U.S. Federal Reserve is seen as trustworthy, the dollar maintains its value. But there’s nothing standing behind cryptocurrencies like Bitcoin. 

“The problem with it as a currency is there no intrinsic value behind it,” Brian Adams, a finance professor at UP, said. “Bitcoin’s value is derived by whatever someone is going to pay for it. Bitcoin could be worth 10, 11, 12 thousand dollars right now, but it doesn’t mean tomorrow it’ll be worth that much. There’s no stored value behind Bitcoin which is a problem.”

No one knows if Bitcoin’s worth is going to crash or continue to go up. Right now, its worth is holding steady around $8,800, but many swear its worth will continue to increase and their investments will pay off in the long run.

“The level of the value has increased beyond what anything else has increased in previous times,” Adams said. “This could be the biggest financial bubble in financial history.” 

The future of cryptocurrencies 

“Are these people right in that it could be the next big thing and they could get rich doing it?” Adams said. “Possibly, if they time the market right.”

Still, Adams can’t see it making it to the status of the dollar or euro because it doesn’t have a financial institution or hard asset behind it. 

“You can’t use it to pay taxes,” he said. “It can’t be a currency if you can’t use it to buy or pay for anything you want. Anything could be a currency, but to be a viable global currency there are a lot more hurdles it needs to overcome for it to be really institutionalized in the global market.”

“I don’t know what the future is at all,” Hajarizadeh said. “I hope it still goes up and I feel like it could, because everything is driven by technology right now. As technology continues to grow, cryptocurrency could too.”