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Making the switch

» If current problems are solved, cryptocurrency could be to financial transactions what word processors were to typewriters

By BECKY GILLETTE

Wendell Fugitt is a bit of a “crypto nerd.” He drives about two hours a day from his home in Covington County to where he operates his business, Sta-Security, in the Jackson area. He uses that time to listen to news about cryptocurrency, a decentralized digital or virtual currency that uses cryptography as a security feature.

He is a small business owner with no 401(k) or official retirement plan. Now when he has a little extra to put away for retirement, he invests in Bitcoin or Litecoin cryptocurrency whereas in the past he would have invested in physical gold or silver.

“Bitcoin was created by a group of individuals after the 2008 crisis when we taxpayers spent billions of dollars bailing out the banks,” Fugitt said. “When the code was written, the banking crisis was given as a reason for releasing Bitcoin to the world.”

Bitcoin is described as an innovation payment network and a new kind of money. Fugitt said Bitcoin is considered the “gold” of the cryptocurrency world, and Litecoin the “silver.” There are literally thousands of others, and many of those would make a dodgy investment. Fugitt said someone with a lot of money can easily manipulate some of these small cryptocurrencies.

Cryptocurrency can be puzzling to people used to FDIC-insured bank deposits.

“It is a totally different world,” Fugitt said. “Without doing a lot of research, it is hard to understand. Right now, it is mainly crypto nerds who talk about it a lot, but it is becoming easier for the beginning investor.”

He has faith the cryptocurrency is the wave of the future.

“Digital currency is a big thing,” Fugitt said. “Banks are getting into it. Some companies and some countries like China, Tunisia and the Marshall Islands are starting to issue cryptocurrency. It is what is coming. Currently there is a way you can spend Bitcoin on Amazon via debit cards and phone apps, and I hear that within a year you will be able to use Bitcoin and Litecoin on Facebook and Amazon.”

Fugitt first heard about Bitcoin when it was around $400-$600 in 2016. He started watching a few people on Youtube, and even started using Twitter at age 50 to keep up with the crypto news.

“I decided to sell my 1972 Camaro that I had bought about 15 years earlier as a ‘financial investment,’ and bought some Bitcoin in May of 2017,” he said. “Since then, I have still been actively involved in learning, researching and understanding Bitcoin/crypto’s/blockchain and have been ‘investing’ in Bitcoin and Litecoin whenever I have some extra money to put toward retirement.”

Fugitt went to Bitcoin Ben’s World’s Largest Crypto Meetup charity event in Texas a year ago, and in October went to the 2nd Annual Litecoin Summit in Las Vegas. There he met up with the people he has come to know on YouTube and Twitter who have become like family.

“We refer to ourselves as part of the ‘#litecoinfam’,” Fugitt said. “There are a lot of great people doing wonderful things for charities with cryptos.”

Fugitt agrees with everyone he follows and watches that new people first entering “the wild, wild West of cryptos” not invest more than they can afford to lose.

“This is still a speculative market,” Fugitt said. “Cryptos are much easier for the younger, smart-phone generation to understand, use and feel comfortable with. Most of the video games they play use virtual currency, so making the move to a digital currency like Bitcoin\Litecoin is easier for them.”

After returning from the Bitcoin Meetup, Fugitt ended up putting “Bitcoin and Litecoin Accepted Here” on his business cards and his tailgate wrap. No one has yet offered to pay that way, but he’s ready when they do.

Some people like digital currency because it can’t be confiscated by governments or banks like cash. But Fugitt said it is a lot of responsibility to be your own bank. “There is no Mr. Bitcoin to call if you forget your password,” he said.

Some cryptocurrency fans are recommending it as a hedge against the collapse of the U.S. economic because of the spiraling national debt. Dr. Ken Cyree, dean of the School of Business and Frank R. Day/Mississippi Bankers Association Chairman of Banking at the University of Mississippi, said having a small percentage of your investments in cryptocurrency is not necessarily a bad thing. It could hedge against a collapse in one or a few countries. But he warns that it could also create severe losses if the currency fails or, at a minimum, it could be difficult to convert to fiat currency that is generally accepted, like the dollar or Euro.

“For example, if you bought Bitcoin on December 15, 2018 for $3,183, you would be happy that it is worth $8,745 today,” Cyree said. “But if you bought it at $12,927 on June 26 of this year, you would have lost a lot of your investment. So, if you are going to ‘invest’ in cryptocurrency, make sure it is a small part of a diversified portfolio.”

Some pundits have said that cryptocurrency represents a threat to tradition banking and even a threat to the U.S. economic dominance in the world. But Cyree said cryptocurrency, at least at the moment, is not money since it is not generally acceptable as a means of payment, and it is too volatile to be a store of value.

“There are literally thousands of cryptocurrencies, so any particular entity starting one does not necessarily mean much,” Cyree said. “The U.S. dollar is still the world’s reserve currency since we have the largest and most secure economy in the world. Crypto could very well play a role in the future, but I do not believe it will displace the power of the American dollar.”

He has more concern with privacy issues for individuals using the Libra currency created by Facebook. The inventors and champions of Libra tend to focus on the good it could do in developing countries. However, Cyree said since there is no underlying value, such as being pegged to a currency or commodities, the things that make it useful also make it very risky.

“It could fail just as easily as it could succeed, and most ‘experts’ believe it is more likely to fail,” Cyree said. “Caution is warranted while purchasing any cryptocurrency.  The underlying exchange of the currency can be problematic and coins are subject to theft, inability to access your digital wallet that holds them, suspect exchanges that disappear, and an overall lack of regulation or oversight. The underlying blockchain technology could be useful for many applications, and there are many other things the technology can do that is not associated with cryptocurrency.

“I think the overall message for the vast majority of people is to be very cautious and only allocate what you can afford to lose to this emerging technology. The caveat is that if the difficult issues are ever solved, cryptocurrency could be for transactions and financial recordkeeping what word processors were to electronic typewriters.”

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About Becky Gillette