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Retirement is a long way off for Cameron Banga, but he has actively been preparing for it for nearly a decade.

Banga, 30, of Valparaiso, has been an entrepreneur but now works as a software developer for another employer. Banga's investment approach, much like his career, also has taken a few twists and turns, and he simply goes with the flow. 

For now, part of his investment portfolio includes cryptocurrency, a digital asset that is seeing increasing use to make 1-to-1 transactions without involving banks or other third parties. The mostly widely recognized digital currency is bitcoin, which has been soaring in value in recent weeks thanks to exchange holding companies — including CBOE Global Markets in Chicago — now actively trading Bitcoin futures.

Banga has been aware of bitcoin and cryptocurrencies since 2013. Like any investor, he did his homework before investing and recognized the risks.

"I'm 30 and I'm still young, so I figured I could handle the risk," he said. Banga estimates about 10 percent of his investments today are in cryptocurrencies but it won't remain that way for long. 

It's the volatility that concerns him. Bitcoin futures have ranged between $11,500 and $16,200 in recent weeks; a month ago futures were at $9,700.  

"What's been happening with the value the past couple months has been insane," Banga said. "I've been holding onto what I have, but I think it's a bubble and it will drop." 

Keith Conklin, 41, of St. John, who works as a sales manager, considers himself a recreational investor. He started investing in bitcoin in early November.

"When I got in, it seemed like the beginning of something with great potential," he said. Conklin, like Banga, plans to hold onto his shares of bitcoin for now but as with any investment, any dramatic changes could lead to a sell off. 

Transaction innovation 

In September, Jamie Dimon, chairman and CEO of JP Morgan Chase, called bitcoin a fraud that wouldn't end well. He did, however, support the technology behind the digital currency referred to as blockchain, which could greatly speed up money transfer times globally. 

The American Bankers Association also is keeping tabs on blockchain. 

"Bitcoin is the currency but blockchain facilitates ownership of this digital asset and where the real revolutionary idea comes in here," said Rob Morgan, vice president of emerging technologies with the American Bankers Association. 

Morgan compared bitcoin to what America Online, or AOL, was when the internet was first introduced into U.S. households.

"Bitcoin is like AOL in that it made people familiar with (the internet), but at the end of the day it wasn't the best use of the technology and people eventually moved on as the technology developed," Morgan said. "What we're seeing here (with Bitcoin) is much of the same."

Morgan said the use of bitcoin is showing that its underlying technology could revolutionize how transactions are processed. Chase, in partnership with Royal Bank of Canada and Australia and New Zealand Banking Group, recently launched a blockchain-based system to verify global payments, which could cut transaction times from weeks to hours. 

While bitcoin has numerous security features, meant to prevent theft and guard against counterfeiting, one of its hurdles is that processing transactions requires massive computing power. Morgan said the energy required to complete a single Bitcoin transaction would power an average size home for seven days.

That's why wider use of bitcoin may not be the best way to use the blockchain technology moving forward, Morgan said. 

"The way bitcoin is being used today is as an asset that you can invest in," he said. "Once people see something go up, they tend to pile in. What people are putting their money into today, they're hoping the next guy puts in more money to push up the value, so it's certainly not something I would encourage people to invest in today."    

Up for debate

Bitcoin's rapid rise in value and its allure to investors hoping to cash in is a concern among financial and economic experts. 

Micah Pollak, assistant professor of economics at Indiana University Northwest, said bitcoin's extreme volatility is a major issue. 

Since the beginning of 2017, the value of bitcoin has risen nearly 1,500 percent, which makes it difficult for the banking industry to accept or work with the digital currency. 

"Until bitcoin markets stabilize, it will remain an extremely risky currency to hold," he said. 

Another issue banks have with it is that the owner of the digital wallets where cryptocurrencies are stored often are not known. Pollak said that makes it difficult for banks to adhere to its industry regulations. 

However, though bitcoin isn't government backed, so long as two parties are willing to exchange the digital currency for a transaction, it can be used like traditional currency, Pollak said.  

"Currency has always and will always exist that is not backed by any government," he said. "Being backed by a government generally, at least in the case of the government of a major developed nation, stabilizes the currency and encourages more people to use it."  

Banga said he was aware of the risks of investing in cryptocurrencies like Bitcoin, but believes the technology behind it has promise.

"Personally, I believe in the long-term potential of the technology," he said, "but I absolutely would not go all in on bitcoin as it's just one of many cryptocurrencies out there." 


Business Editor

Larry is the Business Editor of The Times of Northwest Indiana.