After a tumultuous ride, many investors are starting to take another good look at alternative currencies. The bottom for bitcoin — at least temporarily — seems to be between US$9,000 and US$10,000 per coin, allowing many to feel more comfortable as they continue to hold this asset or potentially re-enter it.
Although many traditional investors will jump out of their shoes at the reference to cryptocurrency as an asset class, the truth is that this alternative currency is fast becoming just that. Although it’s becoming increasingly difficult to access cryptocurrency, at least there’s now some discussion as to how to regulate this instrument.
Over the past week, Toronto-Dominion Bank (TSX: TD)(NYSE: TD) announced that it would no longer allow customers to use TD-issued credit cards to purchase bitcoin. Essentially the cryptocurrency will become more difficult to obtain (and trade), as many of the institutions that allow for the movement of capital are beginning to clamp down on the purchase of this instrument. For anyone who believes that this can’t be accomplished, I recommend trying to deposit funds into an online wagering (gambling) account by using their credit card. It simply can’t be done.
Although the increased difficulty of obtaining the currency is going to be bad news for investors, the reality is that there is still a lot of good news for believers, as standardized exchanges are starting to emerge for those wishing to participate. In addition, the talk of regulating cryptocurrency would potentially legitimize this asset class, as the government could begin collecting tax revenues from the sale (or gain) in the asset class.
When considering the U.S. endorsement of the currency, it doesn’t need to be complicated. As the government has issued a substantial amount of debt, the government will need tax revenues to pay for the interest expense. It should therefore come as no surprise to investors (and the public) that governments are taxing wherever they can. The good news is that the government won’t stop at cryptocurrencies. Alongside the rise of currencies such as bitcoin, marijuana is in the process of becoming legal in a number of U.S. states alongside Canada. Interestingly, marijuana falls under the purview of the federal government of Canada, whereas each U.S. state oversees the use of marijuana.
Although many investors have taken the plunge at prices as high as US$20,000 per bitcoin, this is an alternative asset that may one day emerge as a mainstream investment (or method of payment). Until that happens, however, investors can expect a large amount of fluctuations in this asset class.
