As investors worldwide continuously adjust their investment portfolios, they carefully weigh the performance of investments and economic conditions before making trading decisions. Armed with this knowledge, investors often opt for traditional investments like stocks, bonds, and mutual funds.

However, those willing to take on more risk may consider incorporating cryptocurrencies into their portfolios. Mark Hauser, a principal in private equity, offers a historical perspective on cryptocurrency markets and explains the significant market appeal of this non-traditional investment.

Moreover, Hauser highlights the potential for regulatory bodies to soon begin oversight of this previously unregulated digital marketplace. While the U.S. Securities and Exchange Commission (SEC) is the most prominent regulatory entity, similar discussions are underway in other countries.

Cryptocurrency Defined

The term "cryptocurrency" denotes a virtual or digital currency secured through cryptographic techniques, minimizing the risk of counterfeiting or double-spending. These currencies operate on decentralized networks utilizing blockchain technology—a distributed ledger running on a computer network. Due to the absence of central authority governing cryptocurrency networks, they are currently less susceptible to government regulation and interference.

Evolution of Digital Currency

Although cryptocurrency is a relatively recent addition to financial markets, the history of digital currency dates back to 1983 when American computer professional David Schaum introduced the concept of e-cash or encrypted electronic tender. PayPal's emergence in 1998 with its email-based payment platform validated the viability of Schaum's electronic money concept.

Cryptocurrency Enters the Picture

In October 2008, "Satoshi Nakamoto," a pseudonymous individual, introduced Bitcoin—the world's first cryptocurrency—alongside a white paper and blockchain database. This marked the inception of a decentralized network that timestamps transactions through hash-proofed work.

Subsequently, in early 2009, Nakamoto initiated the first Bitcoin mining operation, followed by Bitcoin's introduction to cryptocurrency exchanges in 2011. The market saw the emergence of altcoins—alternative cryptocurrencies riding on Bitcoin's blockchain—the same year.

In July 2015, the Ethereum decentralized software platform was launched, enabling decentralized applications and smart contracts without third-party interference or fraud risks.

Cryptocurrencies Receive Global Attention

The cryptocurrency markets began to expand in 2017, with Bitcoin and Ethereum reaching significant valuations. This period also witnessed the involvement of multinational corporations in manufacturing chips for cryptocurrency mining. In 2019, several major financial institutions announced their plans to enter cryptocurrency markets.