Bitcoin(BTC) and Ethereum(Eth) are one of the most famous and two highly disruptive cryptocurrencies looking to leverage blockchain world of technologies to initiate revolution across frequent industries. The core idea behind these cryptocurrencies was to scrutinize each cryptocurrency to mature the perfect investment approach for a $1,000,000 investment which must be held for five years without any additional trading.
To mature an ideal investment strategy, we examined both currencies. After looking at the qualitative similarities and differences between each currency, we analysed the historical performances of each and extrapolated these values to form a five-year projection.
Conversations with industry professionals helped to identify the most probable and impactful factors for the future mandate of both currencies. After integrating our results and accounting for variance, we ran simulations to predict the expected values given a range of inputs and factors. After considering these conclusions, the suitable investment ratio proved to be 69:31 for Bitcoin and Ethereum respectively.
Bitcoin existing a developed predictable value, but the instability and speculative nature of cryptocurrencies indicated a need for diversification across platforms.
What is Money Anyway
Since cultures transitioned from a trade economy to using a currency as a medium of exchange, individuals have tried to invent systems that allow for rational ways to interchange value. In order to assist make goods and services commensurable the Greek theorist Aristotle came up with 4 principles that help to command what is considered to be ‘good money’(Lee, 2009):1.
It must be durable 2.It must be portable 3. Its must be divisible 4. It must have intrinsic value Originally the preferred medium of exchange was gold as it was able to fulfill all 4 of these criteria. As economies grew and the request for a medium of exchange increased, managements were enforced to create a more accessible medium of exchange that they could switch and regulate. This was the genetic of fiat currency.
This particular medium of exchange has been approved worldwide; Nevertheless, it has come with its own set of issues. In order to help fix some of these issues, cryptocurrencies began to develop in 2009, leveraging a disruptive technology called blockchain. A cryptocurrency is a digital exchange that uses cryptography for safety (Investopedia,2016).
Blockchain explicitly contracts with the way in which data is organised and allows for the existence of distributed digital ledgers where single establishments are not able to effect transactions (Hackett, 2016). Presently the two most widely adopted cryptocurrencies are Bitcoin (BTC) and Ether(Eth), the currency that is used to power the Ethereum blockchain.
Specialists in the field of economics, law, information technology and prime security deal with the wonder of cryptocurrencies. One of the motivations that attracted legends of technology, the Internet and stockholders in the beginning is the fact that cryptocurrencies are not subject to control by central banks or state agencies, but their value is determined by a lot of computers.
Namely, cryptocurrencies are protected from inflation by a function that prevents their quantity to grow above a certain limit. The following characteristics of the cryptocurrencies, identified as an advantage, is the elimination of intermediaries, which makes the transactions cheaper – which has great application in international payments.
The following advantage of cryptocurrencies that is emphasized is the fact that they are based on a decentralized system in which there is no regulatory authority. On the other hand, the biggest disadvantage, is precisely the decentralization, the anonymity of the users and the lack of a regulatory agency.
We have acknowledged a large space for further re-search. First, there is inadequate research in the existing literature on the usability of cryptocurrencies and blockchain technology. We have recognised papers that considered usability from the perspective of the user and from the perspective of the software programmer/developer.
However, apart from the use of cryptocurrencies in financial markets, there is still room for the development and use of blockchain technology in the economy. In this regard, most of the existing researches relate to Bitcoin and Ethereum, and rarely are they engrossed on other cryptocurrencies.
Furthermore, research should emphasis on smart agreements and to increase knowledge beyond the cryptocurrencies. Namely, although the blockchain is characterized in the cryptocurrencies environment, this idea can also be used in a variety of other situations.
A further area for research exists in the fact that there are not enough high-quality publications on the use of cryptocurrencies and blockchain in the financial markets at the magazine level. Currently, most researches are published at conferences, symposiums and workshops.