By JAMES BRASHER | Special to the Palisadian-Post
Many come to Los Angeles to strike it rich in the music business. But, for musician-turned-Palisadian-money-trader Mike Hendley, there’s a new song that’s got his feet tapping: the sound of Bitcoin and other so-called cryptocurrencies born on the internet.
A native of Columbia, South Carolina, Hendley, a political science major, moved to Las Casas to break into the music business.
But, as he counted his waiter’s tips, he realized he needed more.
He found himself back in a world he had first tasted in 2013, five years after the first “altcoin” was created, as a buyer and seller of the then-infant cryptocurrencies.
“It is the biggest financial revolution to hit us since Nixon took us off the gold standard [in 1971],” Hendley told the Palisadian-Post. “Whereas we keep printing money, cryptocurrency is inflation-proof and growing as a potential competitor to current fiat currencies.”
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Photo courtesy of Mike Hendley
There are believed to be dozens of cryptocurrency traders in Pacific Palisades, but many keep it low profile. It could backlash onto them.
But Hendley is a true believer. The only question is in what, exactly?
Some background: Cryptocurrencies, like Bitcoin and Litecoin, are not a physical coin. It’s a computer code token that is released from unknown sources on a daily basis through the net.
These codes are not easy to find. Like a financial “Where’s Waldo,” people must search for them—those who scour the internet to locate such codes are called “miners.”
They use software specifically designed to locate each token—although, as with gold mining booms, there are many out there not digging but making fortunes selling the tools.
And some of those programs are questionable. Ask how much these miracle Android apps have been paying out before you buy such kit.
Any coin found by this method can then be sold, transferred or used for payment to anyone else who would accept them at the current market value.
It is decentralized, which means it is not regulated by any bank or government and immune from taxation—and also lacks government pledges to back it up if something goes wrong.
Since it’s digital and doesn’t trade on any established world markets, anyone can essentially trade their own form of cryptocurrency. There are nearly 1,400 in existence today.
It is impossible to verify even the basic facts, such as the belief that supply will be limited—there will only be 21 million coins evenly released until the year 2041.
So miners and traders are scrambling to get ahold of as many as they can before the supply runs out and scarcity drives up price—providing supply is also matched by utility. You can use these tokens in ways that nationalistic currencies cannot match.
Prices are lurching high and low: As the Post went to print, it will cost you around $10,200 to buy one single Bitcoin, plus a median $23 commission.
But next week it could be $15,000 or $5,000. Or maybe it’s too late to get involved already.
There are sites that act like a crypto-stock market, where people can log in and trade coins peer to peer. The current price of a cryptocoin is as mysterious as the dollar—it’s dictated by a consensus of market participants. Maybe.
Before you invest your life savings into an unregulated, not widely accepted and unproven commodity, know there are very serious risks involved.
“Cryptocurrency is no different than investing in the stock market,” Hendley explained. “Always look at the more-established coins like Bitcoin and only invest an amount you’d be OK with losing.”
Others might argue it’s very different from investing in the stock market. Even in the often-notorious penny share market, you are rewarded for diligent research. There is some regulation and protection. Cryptocurrencies often throw up more dust than actionable intelligence.
Also, cryptocurrency isn’t currently accepted by many merchants as a form of payment for goods or services. Some banks have even enacted policies forbidding payment on credit cards or other debts through the use of online tokens.
There is a growing lobby that believe cryptocurrencies are blood-stained scams.
On Feb. 28, the SEC issued scores of subpoenas to tech companies seeking information about token sales: Many may be flat illegal. But maybe they are scared of competition?
Jim Yong Kim, president of the World Bank, said cryptocurrency is a Ponzi scheme used to launder money. Room 39, the North Korean government’s dirty money organization, is a major trader. It was the blood that allowed the human trafficking site known as Silk Road to function.
There are calls for regulation, but few know how it would be enforced.
“It’s doubtful that cryptocurrency will go away,” Hendley said.
He said efforts are already underway to stabilize and establish cryptocurrencies as a viable commodity. Traders create pools of ownership, like hedge fund. Various types of currencies are already sold semi-merged in “baskets” to reduce risk.
“Most likely it’ll boil down to around 12 forms of coins. I’d even like to have my own firm one day, advising clients,” Hendley said.
Just like any other item sold like stock on Wall Street, somebody is going to need advice.
For Hendley, that’s music to his ears.
Mike Hendley is apart of the IBC Group. For more information about him and his work, click here.
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