Cryptocurrencies have become part of the mainstream conversation this year, with an increasing number of UAE residents now interested in investing in the digital tokens.
About 26 per cent of respondents in a May survey of UAE investors said they view these assets as offering “exciting investment opportunities”. About half of all respondents in the survey by global financial services company Holborn Assets also said they would feel comfortable with about 5 per cent of their portfolio in cryptocurrencies.
But experts have issued a warning that cryptocurrencies are only for active investors who can track their prices and have an appetite for risk.
“Investors are right to look at cryptocurrencies for their enormous profit potential. However, remember that if you want to invest in cryptocurrencies, please do so without any expectations – and only put in money that you are able to write off easily,” says Jagdish Golani, a senior financial planning consultant at Nexus Insurance Brokers in the UAE.
“There is no logic behind cryptocurrencies. So, buy on dips and encash your profits at every peak.”
The $3 trillion cryptocurrency market offers room for small investors to make a quick profit, says Erica Stanford, founder of the Crypto Curry Club, a digital asset community in the UK, and author of Crypto Wars: Faked Deaths, Missing Billions and Industry Disruption. She is also part of Cent Finance, a mobile wallet for decentralised finance applications built on blockchain and Ethereum, and the Symmetric decentralised exchange.
“Many are [getting rich], but many lose. Those who do well do enormous amounts of research and understand the markets – some, of course, get lucky,” she says.
Investors who were deeply exposed to cryptocurrencies may have lost money on several occasions this year. In early December, a flash crash for Bitcoin, the world’s largest cryptocurrency, wiped out positions worth $2.4 billion – a month after it reached a record high of more than $68,000. The token lost over a fifth of its value at one stage, with market capitalisation dropping below $1tn over regulation fears. It was trading at $46,473 at 12:20pm UAE time on December 20, according to Coinbase.
Ethereum lost money, too.
We have been here before: in April, Bitcoin climbed to its previous record high of about $65,000 on the back of some regulatory leniency and increased investor liquidity before plunging to below $32,000 towards the end of May.
Yet, stories persist of entire families building Bitcoin fortunes or students becoming Ethereum millionaires and buying six-figure gifts for their mothers.
In theory, cryptocurrencies could recover over the Christmas holidays, when markets are closed, and could blast past the $100,000 barrier in 2022. Or not.
“You need to do your own research,” says Rhian Lewis, a software developer and entrepreneur who has been involved in the cryptocurrency and Web3 community since 2013, and the author of The Cryptocurrency Revolution, a new book about finance in the digital world.
“If someone tries to tell you something about a particular cryptocurrency that sounds too good to be true, then it probably is. Just like you probably should not buy shares in a company when you do not know what it does, take the time to understand the technology underlying cryptocurrencies,” Ms Lewis says.
For those toying with the idea of coining it with these new electronic cash systems, here are the best new books to help understand this rollercoaster investment ride and the history and jargon involved.
The Cryptocurrency Revolution: Finance in the age of Bitcoin, blockchains and tokens – by Rhian Lewis
Ms Lewis goes back to the origins of money to explain why cryptocurrencies are an important technological and financial innovation, and how they could enable banks and financial institutions to become more efficient.
“I think at some point, we will all be using digital currencies, whether we realise it or not. With Visa executing some settlements with USDC stablecoin and governments around the world, led by China, developing their own digital wallets, many people will soon be using it in the background,” she says.
Ms Lewis offers the example of El Salvador, where Bitcoin is legal tender, to show how examples of ordinary people use it for payments.
For some, the currency is seen as a hedge against inflation, she says. Others are encouraged by newly launched Bitcoin exchange-traded funds and non-fungible tokens issued by brands such as Gucci and Dolce & Gabbana. Regardless, cryptocurrency is now reaching a wider audience, Ms Lewis says.
Her straightforward, jargon-free book is a guide to understanding the challenges and opportunities for everyone interested in the financial sector.
Published by Kogan Page, from Dh97
Once A Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West – by Ethan Lou
There are many books about the early days of Bitcoin but journalist Ethan Lou’s cryptocurrency cowboy saga is among the most riveting.
Mr Lou first heard of Bitcoin while browsing the dark web out of curiosity as a student in Toronto, Canada. After an interview with Ethereum founder Anthony Di Iorio, he went on to track, explore and interact with people within the cryptocurrency world, including in North Korea.
Part thriller and part sociological treatise, the book follows Mr Lou’s journey through, as he puts it, “riches, absurdity, wonder and woe”.
It is a quick, racy read that leaves you wondering if cryptocurrencies are a natural fit for millennials, one of the most economically damaged generations.
Published by ECW Press, from Dh66
Crypto Wars: Faked Deaths, Missing Billions and Industry Disruption – by Erica Stanford
Who was the crypto-queen and what was the multibillion-dollar OneCoin swindle? What was Bitconnect and why should we be wary of crypto Ponzi schemes? And did Quadriga founder Gerald Cotton fake his own death to escape prosecution?
In her book, Ms Stanford answers all these questions through interviews with the people investigating those behind the biggest cryptocurrency fraud cases – while concluding that cryptocurrencies have tremendous value in challenging established practices in banking and remittances, and the ability to reach more than 2.5 billion unbanked users.
“I hope the book offers an explainer of how some of the bigger scams continue to get so big, what makes people fall for them and, hopefully, raise awareness and I hope that some people will be educated and thus not fall victim to scams themselves,” Ms Stanford says.
“One could argue that the worst and biggest crypto scams are some that are still ongoing. Regulation has been slow to catch up and innovation is moving far faster than regulation can keep up. Anyone looking to invest should still do a lot of research.”
She says everyone should be using cryptocurrencies because of their many positives, including the ability to send money cheaply and quickly across borders – one reason why they are attracting so much regulatory interest.
“That is not to say that everyone should invest a lot of money or risk anything they are not willing to lose, but there is so much good to crypto and so many exciting things happen that I do feel that it will benefit everyone to become familiar with crypto,” she says.
Anyone who has an internet connection can buy very small quantities of cryptocurrency – even Dh50 – to see how it works. Ms Stanford also suggests downloading cryptocurrency wallets to buy tiny quantities using money you are happy to lose to understand how quickly transactions are enabled.
“I absolutely believe crypto will be mainstream in the near future and so the more people familiarise themselves, the more they will be able to keep up with the trends.”
Published by Kogan Page, from Dh73
The Fiat Standard: The Debt Slavery Alternative to Human Civilisation – by Saifedean Ammous
Economist Saifedean Ammous’s last book, The Bitcoin Standard: The Decentralised Alternative to Central Banking, is widely regarded as one of the definitive books on digital tokens. It framed Bitcoin in the context of monetary theory, the gold standard, fiat currencies and current thinking on financial reform.
His 2021 follow-up, The Fiat Standard: The Debt Slavery Alternative to Human Civilisation, looks at national currencies as a technology, how they are underpinned by debt and how governments control and add to this debt with no real cost.
Again, Mr Ammous relates the book to our own situation, looking at fiat and its impact on family, food, health, education and security. Finally, he examines how fiat and Bitcoin could coexist in the future and what might happen if one fails.
Available at Saifedean.com, from Dh128.50
Cashless: China's Digital Currency Revolution – by Richard Turrin
Mr Turrin offers a case study of how digital currencies are already being used within China’s interoperable cashless society. In only seven years, digital technology has transformed the monetary system within the world’s second-largest economy, with a significant role for its central bank digital currency (CBDC).
A finance insider who spent several years in Shanghai, Mr Turrin explains how this new CBDC is being used, from street vendors to international monetary exchanges, while zooming out for a big-picture view of the implications for other countries, including the threat to US dollar dominance.
Available at Amazon.com, from Dh84