An Investor Who Sees The Future

Trade is an act that benefits both parties.

In the past, trade was carried out through barter. It involved directly exchanging a piece of meat for a sack of rice.

However, as the scale of trade grew and the number of participants increased, there were limitations to bartering. That’s why people started trading using items that everyone could recognize the value of.

This led to the emergence of physical currency. Since physical currency had to have intrinsic value, it was mainly made from gems or metals.

People would carry currency made of gold or silver and use it for transactions. For larger trades, they had to carry carts full of gold and silver coins.

Then someone had an idea. Instead of carrying heavy coins all the time, what if they deposited their gold in a trusted place and carried certificates that could be exchanged for it?

Banks were established, and people started trading with the certificates issued by these banks.

From then on, money became completely separated from its actual value. The certificate itself had no value, but you could always exchange it for the amount of gold stated on it at the bank. Due to this trust, the certificate was as good as gold.

This marked the rise of credit money.

Countries would mint money equivalent to the gold they held, allowing people to exchange money for gold and vice versa.

Even the dollar could be exchanged for gold at a rate of 35 dollars per ounce.

This gold standard system lasted until the 16th century. However, in 1971, the US abandoned the gold standard for the dollar, allowing them to issue currency freely regardless of gold reserves.

With the function of exchange for gold gone, the value of fiat money relied solely on the credit of the issuing authority. The US government guaranteed the value of the dollar.

Trust in the nation was equivalent to belief in the value of the currency.

However, this trust was shaken when the US faced a unprecedented financial crisis and resorted to quantitative easing, essentially printing unlimited amounts of money to boost the economy.

This showed that the value of money could be altered by government policy. When trust in governments to issue and guarantee value eroded, investors began looking for alternatives.

This led to the rapid rise of cryptocurrencies, with Bitcoin being a prominent example.

Cryptocurrencies have several key characteristics.

Firstly, they are secure from duplication and hacking.

First, cryptocurrencies do not have centralized servers managing their data; instead, information from each user is stored in connected blocks known as a blockchain. It is practically impossible to alter existing information without hacking more than half of the blocks simultaneously.

Therefore, in essence, replication and hacking are impossible. Even in the Mt. Gox hacking incident, where coins were stolen from an exchange, it was not the cryptocurrency itself that was hacked.

Secondly, cryptocurrencies operate without a central governing body; a set algorithm determines the issuance of a fixed amount.

Unlike traditional currencies issued and controlled by governments, cryptocurrency developers cannot unilaterally control them. They operate solely based on predetermined algorithms.

Mining, the process of solving cryptographic problems to automatically generate coins, is akin to extracting minerals from a mine. As time passes, mining becomes more challenging, issuance stops after a set amount, and transactions cease.

Thirdly, cryptocurrencies are not subject to government control or regulations for transfers and transactions. Unlike during Brexit when the UK government halted Pound conversions, cryptocurrencies remain unaffected by such measures.

Even if banks freeze an account with large sums, transactions become impossible. In contrast, cryptocurrencies are free from such regulations; as long as connected to the network, transactions can occur seamlessly.

In times of war, one might only need their cryptographic keys to escape without the need for physical cash.

While these advantages are clear, the lack of a governing body means there is no recourse in case of issues. Unlike banks that compensate for hacked accounts, victims of cryptocurrency hacks like Mt. Gox received no compensation.

After the popularity of Bitcoin, hundreds of other cryptocurrencies flooded the market.

Thinking of the future prediction, I asked my senior, Sangyeop, “Do you know about Ethereum?”

Sangyeop nodded and replied, “Oh, I’ve heard about it recently.”

Blockchain is the core technology behind cryptocurrencies, used not only in cryptocurrencies but also in various IT fields. Ethereum, emerging about a year ago, differs from Bitcoin by storing information not just for currency but also for smart contracts.

Therefore, it is possible to program trades to be automatically executed when specific conditions are met.

“You can think of it as a more evolved form of cryptocurrency than Bitcoin.”

“What is its scale?”

“Its market capitalization is not even 1/10 of Bitcoin’s.”

Anyone with the ability to create cryptocurrency can issue it, but not all cryptocurrencies are recognized for their value in the market. While Bitcoin is already acknowledged by many as valuable, other cryptocurrencies are not.

Bitcoin was created as an alternative currency. Traditional banks used to charge hefty fees for exchanging small amounts of money or sending money overseas. Bitcoin offers much lower fees for currency exchange and international transfers.

However, despite its convenience, the current market resembles more of a speculative arena. It is not uncommon for prices to fluctuate by tens of percentages in a single day, even without significant events like Brexit.

Even if Bitcoin rises to $700, its market capitalization combined is around $10 billion. Combining all other cryptocurrencies, it is less than $15 billion.

Due to the small size of the market itself, rapid fluctuations are inevitable with movements in investment capital.

Currency must have stable value. A currency that is worth $10 one day, $5 the next, and $20 the following day would struggle to function properly.

This poses a contradiction for investors in cryptocurrencies. They hope for cryptocurrencies to be recognized as a currency while also wishing for price surges.

While there are places online and offline that accept Bitcoin, they are very limited. Therefore, many currently approach it more as an investment asset than as a currency.

So, are cryptocurrencies a sound investment? Unlike stocks with dividends, bonds with interest, or real estate with rental income, currency and commodities do not generate any intrinsic value. Therefore, investors should focus solely on price fluctuations due to external factors when investing.

How much more growth can be expected in the future?

I pondered deeply.

Does what Oracle showed mean that Ethereum has value worth mining and holding? Does this imply that the cryptocurrency market will grow further?

“Do we have our own cryptocurrency exchange?”

Sangyeop nodded.

“Yes, Bansum. You recommended investing in it before.”

In the early days, Bitcoin was easily obtainable through mining. However, after several halvings, the difficulty level has increased to a point where mining is no longer feasible on personal computers.

People who want to invest in Bitcoin usually purchase it through exchanges. Exchanges connect buyers and sellers of cryptocurrencies and charge fees in between the transactions.

The founder of Bansum was originally a cryptocurrency investor. However, after losing all his Bitcoins in the bankruptcy of Mount Hill Exchange, he decided to create his own exchange.

“How much stake does K Company have?”

“Currently 63.5 percent.”

As the cryptocurrency market grows, exchanges can make profits regardless of market fluctuations. Exchanges tend to attract more users as more people trade on their platform.

“Intensify investment in Bansum. Increase your stake during the equity offering. To stay ahead in competition with other exchanges, you need to expand your scale.”

“Got it.”

“Also, invest in both Bitcoin and Ethereum.”

Currently, Bitcoin plays a key role in the cryptocurrency market. If the value of Ethereum rises, it is likely that the value of Bitcoin will also increase accordingly.

“It might be okay to engage in mining yourself.”

“Mining seems challenging in our country.”

Mining most cryptocurrencies is no longer feasible with personal computers. Professional miners set up mining rigs consisting of hundreds of specialized computers in warehouses.

One crucial issue with mining is the cost of electricity. If not managed properly, electricity expenses may exceed mining profits.

“You could consider placing operations in countries with cheaper electricity costs or colder climates for cooling efficiency.”

“Colder climates can help reduce electricity costs.”

Senior Sangyeop nodded.

“Do you think you’ll be fine?”

“There is a high possibility of market growth in the near future.”

Whether this bubble-like market trend will evolve into a Tulip Mania bubble or establish itself as an alternative currency remains uncertain, but it has certainly created a new investment market.

Investing now could potentially yield significant profits, don’t you think?

“Why isn’t OTK Company investing?”

“It’s because the market size is still too small.”

Their cash reserves alone amount to $300 billion. They needed a market large enough to justify their investment.

I turned to Senior Sangyeop and asked.

“Have you found a new building?”

The current building is too small and lacks security. That’s why we needed to quickly find a suitable place to relocate.

“I’m still looking into it, but I haven’t found any building among the listings that I like. I’ve checked out a few plots, but the locations aren’t great, and it would take a long time to build from scratch.”

Large buildings have limited buyers and sellers, making transactions difficult.

“Money is not an issue, so try to purchase in the best possible location. It would be a hassle to move again later.”

Senior Sangyeop nodded in agreement.

“By the way, Jinhoo, what are you planning to do with the money this time?”

“I’m still considering.”

People spent unimaginable amounts of money.

Taekgyu believed that more money was always better. However, no matter how much you earn, spending it all before you die is difficult, and you can’t take it with you after you pass away.

Isn’t there something better to do than just earning money?

“For now, you should quietly attend school.”

“Is school bearable for you?”

“Just so-so.”

Senior Sangyeop seemed disappointed.

“I was just a year away from graduating if I had continued.”

“Don’t you want to return to school?”

Senior Sangyeop chuckled at my question.

“Returning to school? I’m too busy with what I’m doing now. Besides, I probably got expelled for stopping my studies without taking a leave of absence.”

“That makes sense.”

Suddenly, memories of the days when we were in a club together came to mind. It felt like yesterday when I nervously invested 1 million won.

The person who was the club president back then is now the CEO of one of the most successful investment companies in Korea. And I became the owner of that company.

“We had a lot of fun in our club, didn’t we?”

Senior Sangyeop nodded in agreement.

“Yes, we used to go to the Han River for chicken and beer around this time.”

Fortunately, there are still many good people around me.

“Let’s have chicken and beer at the Han River when Hyunjoo noona and Ellie come later.”

“Sounds good.”

***

After the dust settled on the issues with K Company and Senior Sangyeop, the biggest concern on campus was the final exams. When I first returned to school, I was overflowing with confidence. However, theory and practice are different. Doing well in practice a hundred times does not necessarily translate to good grades. Fortunately, even if I don’t get good grades, it seems like I won’t have trouble graduating.

Professor Kim Myoung-jun, who taught Management Science, looked around at the students and said, “Do you know that Golden Gate is establishing a branch in Korea? Everyone needs to get good grades to get hired there.”

The establishment of a Korean branch was also a matter of concern within Korea University. While the issue of relocating the existing tenants of the building to accommodate the new headquarters was resolved, the real issue lay in manpower.

For now, they plan to transfer the necessary personnel from other Asian branches to Korea. The remaining staff will be hired in Korea as positions become available.

No one knew how much Golden Gate would invest in the Korean market, but they expected to hire at least 500 to 1,000 employees. Golden Gate is a dream workplace for those aspiring to work in the financial sector. Naturally, students majoring in Business and Economics welcomed this opportunity.

However, there were a few peculiar points about this development. First, the establishment of the branch was done very hastily. Typically, a process that would take over a year after announcement was being completed within a month.

Another peculiarity was the choice of location: Gangnam. While private equity funds are typically in Gangnam, Korean securities firms are in Yeouido, and foreign securities firms are concentrated in Gwanghwamun.

Despite everyone’s expectations that Golden Gate would choose Gwanghwamun, they opted for Gangnam instead.

Professor Kim suddenly looked at me and asked, “Kang Jinhoo, don’t you know anything?” I was momentarily taken aback.

Why is the establishment of the branch progressing so quickly and why did they choose Gangnam of all places?

“······.”

Surely it’s not because of me, right?