What Is a Company Valuation?

A company valuation is a process of assessing the economic value of a whole company or part of a company. It can require complex research, data analysis, and mathematical equations.

A company may perform or order a valuation to prepare for the sale of a company or its assets, the merger of two companies, or the acquisition of a company as an investment—for many other reasons.

The methods used for valuing a company can vary according to circumstances and goals. For example, when a company is being evaluated so its assets can be sold quickly, its value will be calculated differently than that of a company that is preparing to merge with another company and share ownership of equity.

Because of the many decisions involved in the valuation of a company, many businesses outsource the task to an expert advisory firm. Such providers may have performed company valuations many times as part of their corporate advisory services.

Common Reasons for Ordering a Company Valuation

What is a company valuation used for? Seven possible situations that make valuations necessary are listed below, although there are many others.

An Opportunity to Sell a Company

At times, the timeframe in which you can sell a company is brief. If you order company valuations on a regular schedule, you’ll be able to take advantage of good opportunities quickly.

A Spin-Off

If your company is going to spin-off a part of itself, it’s vital to have an accurate assessment of the value of that piece of the corporation in order to estimate the fair compensation your company deserves for it.

A Business Expansion

When preparing for an expansion of your company, you may be approaching investors or banks for financing. Having a recent, professional company valuation can convince them to finance your materials and/or structures quickly.

Evaluating a Possible Acquisition

The accurate valuation of a company as an investment can make the difference between a profitable investment and a loss. It can predict the future cash flow of a company and convert that to a current value.

Mergers

During the merger of two companies that are of about equal value, the companies can struggle to agree on the relative value of each. An independent valuation of both firms allows them to begin the process of dividing their equity fairly.

A Separation from Shareholders or Partners

The departure of shareholders or partners can happen suddenly, and it can be difficult to calculate a fair share to give them. An accurate company valuation makes the process much simpler.

The Benefits of an Expert Company Valuation

It’s possible for businesses to perform their own company valuations without extensive experience. However, the results can often be less reliable than those that a professional service firm can provide.

What is a company valuation expert able to do better? Specialized firms keep up with the latest software, methods, and laws related to company valuations. In addition, the fact of having an objective outside report can protect your company from certain types of scrutiny and charges of unfairness.

Very proactive business professionals order company valuations of their own businesses on a regular schedule. You can better prepare your firm for a variety of situations by adopting this practice.

How To Get The Best Currency Exchange Rates & Avoid Fees?

Travelling abroad can be expensive since you will need to use a different currency, than the one you are used to, for purchases and everything else related to your trip. However, you can make it cheap by learning some currency exchange hacks.

Consequently, when you make a money exchange from one currency to the other, you are charged some fees. These fees are often hidden and can be high if you are not careful in avoiding them.

In essence, the currency exchange fee is the difference between the exchange rate the moneychangers and banks decide to apply and the real exchange rate that is traded in the Forex market.

So how can you avoid this currency fee even when using the best currency exchange Ottawa? Here is how.

 

  • Seek no foreign transaction fee credit cards

 

If you are an avid traveller, it would be better to get a credit card that is specifically meant for travelling. These types of cards often offer low to zero fees on all foreign transactions. Besides, they are often connected to a wide range of international ATMs. You can even get luckier with them, as they sometimes waiver any extra currency conversion fees.

However, getting such a credit card can cost you higher annual fees, but not as much as the money, you will spend abroad, especially when it comes to currency conversion.

 

  • Make use of debit cards

 

Debit cards often charge foreign currency exchange fees when you are using it abroad, so the best thing to do is to look for one with low or zero fees. Moreover, debit cards never incur any interest and you will not be charged any cash advance fee.

Likewise, if your bank has ATMs all over the globe then you can save on some withdrawal charges wherever you are.

 

  • Opt for frequent flyer credit cards

 

Such rewards are often expensive, especially when it comes to the interest rates and annual fees. However, some have no foreign transaction fees. Therefore, if you can make your repayments each month, then it would be a great idea to be rewarded for your abroad trips, but make sure it has no foreign transaction fees.

 

  • Order currency before you travel

 

One cost-effective way to get the local currency of your destination is by ordering it before your travel date. You can use different currency converters to make a comparison between the bank’s rate and the market rate.

However, take note that bank fees may apply but it can be waivered at times, if you are ordering many cash. Just make sure you make the bank call before your travel day comes, as they may not have the currency you want at hand or may charge you for fast delivery.

 

  • Research the exchange rate

 

This is the only way you can know if you are getting the best exchange rate with low to zero fees. Therefore, before you embark on your journey check with different currency converters for a better rate. If it is a long trip, you can keep track of the exchange rates to stay updated with the major changes, as currency conversion rates change constantly.

 

  • Avoid currency exchange kiosks

 

You should always avoid the currency exchange kiosks located near tourist locations and at the airports. This is because they are likely to have a higher exchange rate as well as service fee when it comes to currency conversion.

As much as they may seem convenient and advertise no fees for your currency conversion, they are the worst and usually have poor rates and higher fees, so you are better off with a no fee travel credit card.

Conclusion

Therefore, it pays to prepare for such things as currency conversion when you are planning to travel abroad. Otherwise, you will end up exchanging your money at a bad rate with higher fees.

Herbalife is a Trading Opportunity

Herbalife is a thriving company that has a robust business model. Over the past few decades, the organization has delivered strong financial returns to investors. Not only does the company have an expanding product line, but the company also has a solid balance sheet. Unlike most other companies, this corporation does not have a ton of corporate debt.

With the rapid growth of the business, the company represents an excellent trading opportunity. Towards the end of December, there were multiple options contracts executed related to the company. The firm has been the target of short sellers in the past. The most famous short seller was Bill Ackman. He famously predicted that the company would have a stock price worth nothing one day. He turned out to be wrong, and he had to sell all of his investment positions.

Past Issues

The organization has had some issues in the past. Multiple executives have left the company due to various problems. At one time, the product quality offered by the company declined. As prices increased, consumers were receiving fewer servings of vitamins.

A new CEO took over the business and decided to make sweeping changes. These changes required a significant financial investment. It took several years before the business was profitable, but the product upgrades helped improve the products offered to consumers.

Direct Marketing

Another reason that Herbalife has been criticized is that the company offers direct sales opportunities to people who want to make extra money. Some people have called the company a pyramid scheme because of the direct sales tactics used. Direct marketing is a legitimate way to earn additional income each month. Some people who join the program have unrealistic expectations about the monthly income they will receive.

People in impoverished nations do not have a lot of extra opportunities to make money. However, some people have criticized the company for embellishing how much a direct salesperson can earn. The new leadership team at the company decided to keep the direct sales program, but the marketing surrounding the program has drastically changed.

Investing in the Business

This company is an exciting investment opportunity for multiple reasons. The company is one of the most significant supplement manufacturers in the world. With significant buying power, the company pays a small amount for the products sold to customers. The profit margins are so high that the company can afford to spend millions of dollars on advertising each year. The advertising programs have made the company one of the most iconic brand names in the United States. With all of the international expansion, the business is now a global brand.

Investors who purchase stock in the company should be prepared for volatility. In the past year, the stock price of Herbalife nearly doubled. Any disruption in sales could cause the stock price to fall rapidly. Although some people enjoy purchasing options contracts on the stock, options are a risky way to invest in the stock market. Anyone utilizing this strategy needs to spend a lot of time researching various investment options.

Ways to save money during the divorce process

It is always good to be objective about divorce. This is something that most of the couples never want to talk about. But there is no denying that divorce can be so problematic. The pre-divorce and post-divorce problems are overwhelmingly stressful. However, the divorce process itself can be very difficult due to the financial aspects.
Divorce can be costly. But there are many ways in which the couples can save money while the entire divorce process. Here are some of the ways listed in which this can be done:

Choose lawyer carefully
This is the first and foremost step in ensuring lesser costs. Divorce is a technical area and every couple will need a lawyer. There are thousands of lawyers out there. Good lawyers tend to be expensive but the investment can be worth the money. Spending on a cheap lawyer that do not have the relevant expertise and experience carry out the formalities in the wrong manner which will further incur more costs.

Negotiations must be kept friendly
The divorce can be kept as short and inexpensive possible if the negotiations go in an amicable manner. The uncontested divorce results into lesser bills and can help in saving a great deal of money. Take out some time to sit down with the spouse can negotiate the agreement without the need of lawyers. Narrow down the exact issues and then inform them to your lawyers to save costs. This is one of the most effective ways to keep the cost at its minimum. But make sure to read some reviews about the services providing you with divorce documents.

Do not contribute to unnecessary litigation
Litigation costs can be immense. Countless deadlines approach during the whole divorce process. It is better to stick to those deadlines which will help to save lawyer’s fees. Divorce cases entail a lot of documentation. The best way to save time is to be in correspondence with the attorney and provide him the documents in a timely manner. This will ultimately help in avoiding litigation that is unnecessary adding more to the costs.

Income must be reported accurately
Even though this may not help to save the money directly, it does help in staying out of the judge’s disappointments. If the income is not stated correctly, serious fines and penalties may be imposed. A good lawyer will never try to conceal financial information. This is not a good strategy to adopt at all. Be honest with all sorts of financial reporting to avoid additional costs in terms of penalties.

Don’t be too emotional
This is an effective tip that most couples tend to undermine when they take their cases to the attorney. Attorneys are not supposed to deal with your emotional issues. It will cost you a great deal of money if hundreds of hours are only spent discussing the emotional issues. It is important to understand that your relationship with the lawyer is not a personal one.
Here were some of the ways in which the entire divorce process can be kept as cheap as possible.

Mutual Fund Calculator: Calculate Growth, Equivalent Annual Yield

Mutual Funds are gaining popularity day by day among the investors. These are one of the best investment plans which not only give higher returns but also help to save money for income tax purpose. Any individual who is above 18 years of age is eligible for making Mutual Fund investment.

Investing is pretty easy with mutual fund. An investor can make use of Mutual Fund Calculator to calculate the expected profit on the amount invested. These Mutual Fund Calculator can be accessed online that too free of charge.

Before understanding the importance of the mutual fund calculator it is important to understand the different types of returns.

Different kinds of Mutual Fund returns:

Absolute returns: In this kind of returns, the growth or reduction in the investment is expressed in percentage. This kind of mutual fund return calculation is done for the schemes which have tenure < 1 year.

Annualized Returns: In this, the growth of the investment is calculated on yearly basis.

Total Returns: Total return indicated the actual returns earned by the investor on the invested amount. This includes principal gains as well as dividends.

Trailing Returns: It refers to the annualized profit over a standardized time period which ends today.

Point to Point Returns: To calculate these returns investor needs to know the start date and the end date of the scheme. It calculates the returns earned by a mutual fund between two particular dates.

Rolling Returns: Rolling returns represents the average returns earned on the mutual funds for a specific period. The return durations can be calculated on the daily, weekly or monthly basis.

Compound Annual Growth Rate: this method is used to calculate returns of mutual funds where investment is done for a period exceeding 1 year. While calculating returns through this method it is assumed that the funds are increasing at a steady speed.

The manual calculation for calculating CAGR:

CAGR = [(Current NAV/ Beginning NAV) ^ (1/number of years)]-1

 

Calculating returns manually is not so easy. Moreover, investors may lack the in-depth knowledge of different kinds of returns and the various methods to calculate them. In such cases, use of Mutual Fund Calculator is the best solution.

 

Mutual Fund Calculator:

A number of Mutual Fund Calculator is available online. An investor can use these calculators to calculate the growth and the annual yield of the invested amount. Using Mutual Fund Calculator is very easy. An investor needs to enter following details:

  • Mutual Fund name
  • Plan selected
  • Dateof returns: fromand to

After this, the investor needs to click on calculate”. The Mutual Fund calculator will do the calculation and give the annualized and absolute returns for the desired period. The calculator can calculate the mutual funds return for a period ranging from 1 week-5 years.

Besides giving the profits/returns on the investment, the Mutual Fund Calculator also helps in calculating:

  • What amount to be invested to earn a specific return?
  • The future worth of the amount invested
  • The time period for which investment should be done.

Types of Mutual Fund Calculators

  1. SIP Calculator: Systematic Investment plan gives the investor an option to invest money on the monthly basis. A pre-decided amount gets deducted from the investors account every month and is invested in the selected plan. The advantage of using SIP is that investor continues with the investment without disturbing monthly financial plan.

The SIP calculator calculates the value of the investment done on basis of the inputs entered by the depositor. The investor needs to enter following details to calculated investment returns by using SIP Calculator:

  • SIP monthly installment amount
  • The expected rate of return
  • The time duration of SIP investment

An important thing to keep in mind is that the calculator gives a result on basis of the details entered by the investor; hence the results may change depending on the market fluctuations.

  1. Lumpsum Calculator:  These calculators are used to calculate returns on the mutual funds with one time investments. The main benefit of using this kind of fund is that the NAV remains the same for all the purchased units. The returns can be calculated by entering following details:
  • The investment amount
  • Estimated ROI
  • Mutual fund scheme tenure
  1. Retirement Calculator: Most of the people do investment keeping in mind their plan for retirement. Manual calculation of the amount needed to live resourceful life after the retirement becomes quite difficult. Retirement Calculators is the solution for this. Details that need to calculate the expected amount that investor needs to invest to live a good retirement life include:
  • Current age and the expected retirement age
  • Monthly expense
  • Rate of inflation
  • Expected returns from the current investment plan till ret

The calculator will give the results on basis of the data entered. This helps the investor to make decisions regarding the retirement plan.

Benefits for using an online Mutual Fund Calculator:

  • Most of the online Mutual Fund Calculators are free. This means there is no fee associated with the use of these calculators.
  • These calculators are easily accessible from any device which has an internet connection.
  • Most of the Mutual Fund Calculators can be used 24/7 FOR 365 DAYS.

 

  • Mutual Fund Calculator is very reliable as they give accurate results.

 

  • Use of these calculators helps investors to decide on the amount they want to invest in the Mutual Fund.
  • The calculator also helps the investor in comparing various schemes on basis of the returns. This gives an investor a better picture of various funds.

 

Precautions to be taken while using Mutual Fund Calculator online:

Using a fund calculator is always advisable before taking any mutual fund investment decision. However, it is important to be careful while using these calculators online. Some of the precautions that need to be followed include:

  1. Avoiding giving personal details. An investor should always be careful while using these investment calculators. The investor should give only the basic details like bank name and address.  Details like account number and other security details should not be mentioned.
  2. Most of the famous fund calculator sites have heavy traffic during busy hours. It is advisable to use these fund calculators at the odd hours. This will save time and the investor can use the calculator easily.

3 Reasons to Opt for Luxembourg Incorporation

Luxembourg may be one of the smallest countries in Europe, but it’s one of the richest countries in the world in terms of GDP (Gross Domestic Product). Luxembourg has managed to establish a business environment that offers important tax advantages for foreign investors, therefore many foreign entrepreneurs have opted for the Luxembourg incorporation, because companies established in this country can benefit from unique tax advantages, no matter their size.

Being a founding member of the European Union and having a strategic location right in the heart of Europe, Luxembourg is still often regarded as a tax haven. However, Luxembourg establishes the perfect balance between providing a business-friendly environment with low taxes and the flexibility of the tax system constantly adapted to the EU legislation in order to prevent harmful conflicts. This balance was more than necessary as many foreign investors opt for the Luxembourg incorporation when establishing a company that deals with cross-border transactions. Due to its geographical location and its status as a core EU member state, Luxembourg is the perfect destination to set up the head offices of a company operating in various jurisdictions or a logistics center for commercial activities in some of Europe’s strongest economies.

Having an adaptable and progressive approach regarding taxes and tax regulations, Luxembourg is recognized as a stable and well established location for start-ups, multinationals, financial structures and tax planning. In addition, there are other important reasons to consider the Luxembourg incorporation process to open a new company.

Luxembourg’s legislation

All companies incorporated in Luxembourg are subject of the Belgian company law established in 1913 and a large number of its subsequent amendments are based on EU directives. Many foreign companies and investors choose the Luxembourg incorporation process to open holding companies in the country. Holding companies are formed under the Luxembourg law of 1929, which is why this type of business structures is also known as holding companies 1929. The respective law created a privileged tax regime for companies that have the sole purpose of holding shares in other companies from Luxembourg.

The tax system

Speaking of Luxembourg’s favorable taxation, there’s another important advantage for holding companies. Holdings are exempt from taxation and are only subject to capital tax and to a tax for subscription of shares levied at a rate of 0.2%. Unlisted companies are taxed on capital subscription but the tax rate varies.

Another common business structure used for Luxembourg incorporation is the SOPARFI. This type of company is fully taxable but it benefits from the participation exemption in Luxembourg, as well as from provisions included in double taxation avoidance treaties concluded by Luxembourg and from the provisions included in the EU directive regarding parent companies and their subsidiaries. As a result, most capital gains and dividends are exempt from tax in Luxembourg. In addition, tax rates of the withholding tax on dividends paid by foreign companies to a SOPARFI are usually low. Given its important tax advantages, the SOPARFI is a business structure often used for holdings and financing activities.

Double taxation avoidance treaties

Luxembourg has concluded several double taxation avoidance treaties with countries from all over the world. This means that withholding taxes on dividends, interest and intellectual property are often reduced to 0%, depending on the taxpayer’s country of residence.

The incorporation process is relatively simple and it can become even simpler if foreign investors choose to acquire the services of a firm specialized in the Luxembourg incorporation procedure and in all the other legal aspects related to it.

 

 

James Dondero Is A Generous Philanthropist And Smart Businessman

Who Is James Dondero And What Is His Background In Business?

James “Jim” Dondero is a major financial investor and philanthropist that resides in the Dallas-Fort Worth metro area. He is famous for being a co-founder of Nexbank. Jim Dondero also serves as the president at the bank as well.

Mr. Dondero has also founded another financial company. He helped co-found Highland Capital Management L.P. This firm is one of the most prominent managers of loan obligations secured by collateral in the United States in terms of dollar value. Jim Dondero also serves as the president of Highland Capital Management L.P. right now.

James “Jim” Dondero also holds a board position at the HCM Acquisition Company. His board position there is as chairman of the board. Jim Dondero is also the chief executive officer at this acquisition company. His two prominent roles at HCM Acquisition give Jim Dondero a considerable amount of influence in how the company is operated. Mr. Dondero also serves as the chairman of the board at the Cornerstone Health Group.

Mr. Dondero currently has more than three decades of working in the credit markets across a variety of companies and positions. Before he founded Highland Capital, Jim Dondero worked at a capital market subsidiary company of the Protective Life Insurance Company. His job at this subsidiary company was as the chief investment officer. In this position, he grew the subsidiary’s assets from zero to $2 billion in a span of only four years.

Jim Dondero has an incredible amount of portfolio management experience. He has successfully invested in and managed both common and preferred stocks. He has also overseen high-yield bond investments, investment grade bonds, financial derivatives, mortgage-backed securities and leveraged bank-loans. His financial management experience even includes emerging market debts.

Early on in his career, Jim Dondero worked for American Express. He oversaw a fixed income fund for American Express that had a value of about one billion dollars. Mr. Dondero worked for American Express between 1989 and 1993.

Jim Dondero has a strong educational background that set him up for success in the financial sector. He completed a financial training program at J.P. Morgan Chase. His alma mater is the University of Virginia. He graduated from the University of Virginia with a bachelor of science degree in commerce with a concentration in accounting and finance. Mr. Dondero is a certified managerial accountant and also holds the title of chartered financial analyst.

A Look At James Dondero’s Recent Philanthropic Giving

James Dondero has been incredibly fortunate to have such a vast fortune under his name. His financial management company has also thrived under his leadership. Great wealth brings many responsibilities and comes with a duty to give back to the community. Mr. Dondero takes this to heart and gives millions of dollars away to charities and other good causes.

Mr. Dondero recently gave one million dollars through Highland Capital Management to the Center for Brain Health. The million dollar gift has helped the center create a brand new facility called the Brain Performance Institute. This institute will help veterans deal with mental and emotional problems that can result from being under severe stress while on duty.

The center will also work to help strengthen the minds of the veterans through the SMART program. This stands for Strategic Memory Advanced Reasoning Training. The new approach will help veterans deal with issues they may have and help them adjust back to civilian life. James Dondero has also helped to establish a lounge at the Brian Performance Institute. The Highland Warrior Lounge is s place where veterans and their loved ones can gather and relax while visiting the Brain Performance Institute for treatment.

Affordable Housing Through Crowdfunding

Park Place Communities is making their next effort in providing affordable housing a reality for more American citizens. Park Place Communities, PPC for short, has become nationally recognized for its specialization in affordable housing. The organization has set a goal of becoming one of the top 50 owners of mobile home communities in the next two years.  Their plan involves taking existing trailer homes (often called mobile homes) and then renovate them using the latest housing industry know-how and technology. They nearly brand-new mobile homes will then be put on the market with amortized mortgages in the range of five years. Payments will last for five years only, and a maximum of twelve percent.

PPC CEO Andrew Lanoie says that this new and innovative program will help buyers of modest means purchase a mobile home for nearly the same amount as monthly rental costs. Their goal is to purchase between fifteen and twenty thousand mobile homes by 2020. Lanoie says that the demand for affordable housing is gigantic today, and is only growing to grow more urgent in the coming years. He said that as of 2018, there are only about fifty thousand mobile home parks in the United States that have reasonably affordable houses on them.  

The prestigious CoreLogic Home Price Index indicates that projected housing costs have risen over five percent for the past 2 years, which makes the mobile home market an even better prospect as a viable alternative to traditional housing. Lanoie adds that with the continuing and widening wage gap in America the shift towards less skilled and lower paying jobs, as well as part-time work, means workers need the kind of housing that most builders and home contractors are unwilling to commit to. Lanoie says that the Social Security Administration now pegs nearly forty percent of American workers at salaries below twenty thousand dollar per year; the percentage that earn under thirty thousand is at fifty percent.

PPC has invested heavily in affordable mobile home parks across the country during the past several years. Right now they are managing over a thousand homepads in eight states, which represents a sum total of thirteen mobile home parks. Their goal, as stated above, is to locate a one million dollar pool of mortgage funds so they can help buyers obtain a fixed rate mortgage at a reasonable price. They offer debt investment opportunities that will be guaranteed by first lien security. It is also planned that they will offer a corporate guarantee at around ten percent return on interest for investors. Lanoie says that the first step is already underway, with the renovation of over a hundred mobile units in several different states.

Lanoie insists that even though these types of dwelling are labeled as mobile homes they very rarely are taken from one spot to another. The cost to do so, he says, is around three thousand dollars. Which means that ninety-eight percent of all mobile home will remain in the same spot and never be moved. This, claims Lanoie, is why mobile home property is such a good investment during times of financial uncertainty.

How to Best Invest Your $1,000 This Year

If you have $1,000 to invest, you can make money in a myriad of ways. Having said that, there are some methods that are better than others. The buzzword here is “speed”; we’re not talking about long-term buy-hold strategies. Rather, we’re talking about ways you can make money fast.

Even when it comes to markets that might take time to move, investments can often turn into legitimate profits and fast gains by simply utilizing the right strategies.

So, what are the right strategies?

While you absolutely need a long-term strategy for saving and growing your money, the following investment strategies will help you create some momentum and generate some capital quickly in the short-term.

Play the Stock Market

There is no question that day trading is not for the faint of heart. It takes a great deal of grit and determination. It also takes understanding the different market forces at play. This isn’t something intended for amateurs. However, if learned properly, it is a way where you can quickly (within the span of hours) make a significant amount of money with a relatively small investment.

Invest In a Money-Making Course

Believe it or not, there is a myriad of money-making courses on the Internet. The most difficult part is choosing the right one. While many of the gurus might follow you around on social media platforms such as Facebook, not all courses from all experts are created alike. Spend the time doing the necessary due diligence and research to choose the best one that’s right for you.

Having said that, investing in yourself is one of the best possible investments you can make. While you might not be able to pinpoint an actualized return on investment, there’s no money that’s better spent. Take time to invest in yourself and your education.

Trade Commodities

Trading commodities like gold and silver present a very rare opportunity, especially when they’re trading at the lower end of their five-year range. Numbers like that give a strong indication on where commodities might be heading. Not always. But usually.

The basics of economics drive the price of commodities. As supply drops, demand increases and prices rise. Any disruption to a supply chain has a significant impact on prices.

Trade Cryptocurrencies

There is no question that cryptocurrencies are on the rise. While trading them might seem a tad risky, you could limit some fallout from a poorly-timed trade if you hedge your bets. Eric Gordon, CEO of ErGo Ventures LLC, a private equity and venture capital investment company, knows there are plenty of platforms for trading cryptocurrencies. Having said that, it’s important to educate yourself before you dive in head first. Find courses on platforms like Kajabi, Udemy, or Teachable in order to learn the ins and outs of trading things such as Bitcoin, Litecoin, and others.

Only a handful of cryptocurrencies really matter today out of the over 3,000 in existence. You’ll want to find an exchange, examine the trading patterns, look for breakouts of long-term moving averages, and get busy trading.

Cryptocurrency: Value Without “Value”

Yes, that’s right. The title may have a few of you baffled. Why is the second value written within quotations? That’s because value is inherently subjective. We all view things differently, each with varying degrees of importance. Currency is the one true standard that we use to be are able to assign a value to things. Before currency was established, barter was the means of trade. That had many problems in itself, chief of which is the accuracy of what you’re trading for what you’re getting.

Currencies are regulated and managed by the governing body of any community. This central authority regulates the ebb and flow of money and it also monitors the value of the currency with respect to currencies from other countries. This requires another governing body to determine which currency has more value than another — that is in fact the whole premise that foreign exchange is built upon.

Of course, we aren’t here to discuss the foreign exchange. Rather, we’re going to discuss something that’s been quite disruptive in recent years — cryptocurrency.
What is it, how is it used, and most importantly, how do cryptocurrencies have value?

Cryptocurrency is a form of electronic currency that was initially introduced in the form of Bitcoin by Satoshi Nakamori. Satoshi, as a matter of fact, did not intend to create cryptocurrency. At the time of this serendipity, Satoshi actually meant to create an online cash system.

But the important premise of cryptocurrency is that it presents an alternative currency that’s transparent and secure at the same time. And this was achieved through decentralization and blockchain. The security of cryptocurrencies actually lies in its transparency, which are two concepts that typically don’t mix — and yet, here we are.

Cryptocurrencies are used as a form of electronic currency, but really, the hype surrounding it primarily revolves around the volatility of the currency, where its value can easily soar up to 10 times its initial value, but it also has the risk of dropping just as much in value.

And while a transparent, decentralized system may sound like it’s just asking to be hacked, that couldn’t be further from the truth. This is because of blockchain, a security process that protects cryptocurrencies by allowing each member of the network (a node) to access the blockchain (or master ledger), which is both unalterable and permanent. Basically, whenever a transaction is conducted, a node is assigned to verify the transaction. When the process is verified, the updated data is then added to the blockchain, which, as we established earlier, is unalterable and permanent. Each member of the network is then able to view this updated information and in turn, update their own ledgers to match the master ledger. This way, any inconsistency is easily seen and can easily be singled out.

Now, there are a lot of factors that influence the value of cryptocurrencies, and these are the same factors that influence the value of just about anything. The two factors that have the most influence in this case are Public Perception and Supply/Demand.

The fact that cryptocurrencies are decentralized and secure is enough to raise the inquisitiveness of the general public, and as a general rule, anything that raises curiosity on such a scale is bound to have a high demand for it. Couple that with a limited supply of just 21 million Bitcoins, for example, and you’ve got the basic recipe for a high-value item.

But that’s just the basics — the link provided above is the full and specialized explanation of cryptocurrency value. And I’m speaking of the totality of the cryptocurrency value here. The security, transparency, and the limited supply all contribute to the inherent value of cryptocurrency. And while some governments are slowly recognizing cryptocurrencies as a legitimate form of currency, most governments would still disregard its value.