The emerging realm of ‘cryptocurrencies’ has spawned collective lunacy, resulting in an illogical gold rush. I understand your desire but don’t be a fool.
Over the years now, assuming it would just blow over.
However, collective lunacy has sprung up around the emerging sector of “cryptocurrencies,” resulting in a worldwide gold rush. It’s come to the point where many financial stories – and emails – are asking whether or not to “invest” in BitCoin.
Let’s begin with the obvious:
No Bitcoin Is Not A Good Investment
It is because it is not an investment, in the same way, that gold, tulip bulbs, Beanie Babies, and rare baseball cards are not.
These are all items that people have purchased in the past at exorbitant rates, not because they were helpful, produced money, or had social worth, but purely because they believed they could sell them for more great money in the future.
You are speculating when you make this type of transaction, which you should never do. It isn’t a good thing to do. You’re in a psychological game with the sole goal of making money against other humans. Even if you gain money by accident, you have wasted time and energy; thus, you have lost.
Investing entails purchasing an asset that generates products, services, or cash flow for an extended time, such as a profitable firm or a piece of real estate. An investment is an intrinsic value meaning that it would be worthwhile to own even if you could never sell it.
To understand why bitcoin has overgrown, we must separate the utility of the underlying technology known as “blockchain” from the fanaticism of people who have turned bitcoin into a giant lottery. Bitcoin is a well-known way to use blockchain, which is essentially a clever software creation (which is open-source and free for anybody to use).
Blockchain is a computer technology that allows two people (or machines) to conduct transactions (sometimes anonymously) even if they do not trust each other or the network they are connected to. It may have monetary uses or be used to share files, but it isn’t going to make you a billionaire overnight.
Our banker says that the first Cancer-Pill (bitcoin) could see a lot of interest at first. Prices would rise, mainly if supply were restricted (just as an artificial supply limit is built into the bitcoin algorithm).
However, because the formula is public and accessible, other corporations quickly produce cancer medicines. Cancer-Away, CancerBgone, CancEthereum, and a slew of other rivals would emerge. A tablet is simple to create and costs only a few pennies each dose.
Imagine, however, that everyone starts bidding up Cancer-Pills to the point where they cost $17,000 each and vary in price wildly for no apparent reason. Even your barber and massage therapist are offering ideas on how to invest in this new “asset class” as newspapers start reporting prices daily, generating so many tales of sudden riches.
Rather than understanding how absurd this is, more people begin bidding up every new type of pill (cryptocurrencies) until they become some of the earth’s most “valued” items.
This real-life human herd mentality is illustrated in this screenshot from coinmarketcap:
“Holy Shit!” Is The Only Response That Makes Sense
If you look at the value of bitcoin, it’s worth $238 billion. Then there’s Ethereum, which has a value of $124 billion, and so on.
Its worthless computer data has an imaginary value that could change the world, for example, by ending poverty or replacing the world’s 800 gigawatts of coal power plants with solar power.
Investing in Bitcoin (also known as Cancer-Pills) has become a mistake due to a combination of human herd mentality, greed, the fear of missing out, and a lack of knowledge about previous financial booms.
To Better Understand This Craze, We Need To Look At Why Bitcoin Was First Made
The legend says that in 2008, an unknown person wrote a white paper under the name Satoshi Nakamoto. Because the author used software and math, they must have been very knowledgeable. Paper also has some in-built ideology: the idea that giving national governments the ability to monitor money flows in the financial system and use it as a form of law enforcement is wrong. It is what the paper is about.
People who like to be in charge of their own money make up the heart of bitcoin. If you read or listen to pro-crypto blogs and podcasts, you’ll hear this kind of thing.
In places like Venezuela, the government can take your money when you sleep. Bitcoin is a lifesaver.
The US Federal Reserve is a bunch of crooks, they say. Inflation is a way for them to steal your money, and the “toilet paper” they issue is just paper.
It’s all the same things that people say about gold. It’s just another thing that people waste their time and money on.
Government-issued currencies have value because they show that people trust each other and work together. Without these two things, there will be no wealth or trade. You might go all in and put your trust in people.
Besides that, another reason for the value of bitcoins is that there will only ever be 21m of them. They will replace all other world currencies, or at least become “new gold.” it means that the fundamental value of bitcoin is either the world’s GDP or the value of all gold, divided by 21m.
There is a minimal chance that bitcoin could become the world’s currency, and people who think this say that it is way undervalued.
You could make the same argument when it comes to my fingernail clippings. They may not be worth anything, but there is only a limited number, so let’s use them as the new world money.
To Make Bitcoin A Real Currency, It Needs To Have A Lot Of Things
These things are:
- People can trade without any problems.
- It should be widely used as a form of payment for all debts, both private and public.
- A value that doesn’t change, so prices can’t be set.
None of these things are in Bitcoin. Even keeping it safe is hard. In Japan, Bitfinex and other Bitcoin exchanges have been hacked and many other wallets and exchanges.
In the second point, it’s crucial. Bitcoin is only valuable if it is used as a primary world currency. There are times when you need to buy coins from someone else because you can’t do significant parts of world commerce without them. At the moment, only people who want to make money are causing the price of things to rise.
To make a currency like bitcoin valuable, you have to exchange it for a real one, like the US dollar, it used to buy something useful, like an expensive home. When the number of people who aren’t smart enough to invest in something goes down, the value often goes away quickly.
Another thing to remember is that a currency should not be artificially low. I need it to grow as there are more things to buy and sell in the world, or we’ll end up with deflation and people hoarding things. It is good to have the Federal Reserve System and other central banks to help run the system.
Finally, Because “It’s Been Going Up In Price Lately” Doesn’t mean it’s a Good Investment.
There aren’t going to be any governments worldwide that let everyone start trading money anonymously and not paying taxes with bitcoins. It will be government-backed, like a new “Fedcoin.” If cryptocurrency takes off, it will be in a form like that. A feature of it won’t be total anonymity or a way to get around the government, though.
The cryptocurrency bubble is a lot like the bubbles of the past. These are things we’ve done to protect ourselves from this bug in our operating system, and we know about them.
Stocks in the US are now regulated by the Securities and Exchange Commission because, in the old days, many stocks are sold to people who didn’t know much about investing as a way to get rich quickly. People who invest in things that go up in price tend to be more willing to buy them.
Don’t be like these people.
