Why crypto currencies are nothing but a scam?
Why crypto currencies are nothing but a scam?
What is crypto currency?
Crypto currencies are nothing but just another FIAT Currency. It is completely digital/virtual and not backed and regulated by any governments. Bitcoin is one of the most famous crypto currency. Crypto currencies use an online ledger with strong cryptography to secure online transactions.
Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.
Why are cryptocurrencies so popular?
Cryptocurrencies appeal to their supporters for a variety of reasons. Here are some of the most popular:
- Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable
- Some supporters like the fact that cryptocurrency removes central banks from managing the money supply, since over time these banks tend to reduce the value of money via inflation
- Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems
Are cryptocurrencies a good investment?
- Cryptocurrencies may go up in value, but many investors see them as mere speculations, not real investments. Reason is simple, Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did.
- That’s what’s called “the greater fool” theory of investment. Contrast that to a well-managed business, which increases its value over time by growing the profitability and cash flow of the operation.
- But a crypto currency like bitcoin don’t have anything to back it, it’s value is created out of thin air. It doesn’t have any value, it’s value is 0. It is currently running just on blind faith, but day is not too far that everything will fall apart.
- You may say, this is true for all the fiat currencies like dollar or euro or rupees. Yes, that’s right. All the fiat currencies are worthless, so you should never hold them except for your emergency corpus. Always invest the FIAT currency you have in assets like Real Estate, Businesses (i.e good stocks).
- Also, in case of dollar, euro or rupee, central banks of respective countries regulate it, so those governments have enough reasons to ensure it won’t go worthless even though it may loselittle bit of it’s value everyday due to inflation.
- But when it comes to crypto currencies, everything can go to 0 in just few minutes and you won’t have any regulator to run it. You will just have digest your loses and move on.
- For those who see cryptocurrencies such as bitcoin as the currency of the future, it should be noted that a currency needs stability. Bitcoin and other cryptocurrencies have been anything but stable through much of their history.
- One guy, Elon Musk with just 1 tweet crashed bitcoin by 20% in April 2021. And those who invest in cryptos because of musk should remember he is a good businessman but not a good investor. So don’t blindly follow him.
- Some people say, crypto currencies are mined and it is a very limited asset. So it is like gold and limited quantity makes crypto currency similar to investing in gold. But NO, crypto is not equivalent to gold. Number of bitcoins may be limited due to algo constraints, but you can always create a new crypto currency just like that out of thin air. Just because it is limited doesn’t mean it is worthy.
- More than 10,000 different cryptocurrencies are traded publicly. New Cryptocurrencies continue to emerge everyday, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies is more than $2 trillion.
- If you still want to play in crypto market, enter as a trader and not an investor. This is too late to for an investor to get into cryptos. But if you are a good trader, you can use the volatility in cryptos to make some quick money. But that will work only if you are a good trader with proper risk and money management.
Takeaway:
All the crypto currencies are FIAT Currencies without anything backing them, so it’s value is 0. They are not regulated by anyone or anything, so you can’t even run to anyone in case you lose all. All the crypto currencies without any central banks backing them will definitely become worthless sometime in the future, but we will never know when it will happen. But when it happens, everything will fall like a rock and might even be over in matter of hours. And trigger for this can be anything, so we can never predict it as well. It is just like any other scam or pyramid scheme, it will come down crashing one day and that will happen super fast too. Don’t get carried away due to the latest hype in crypto, it is like any other market crash, it will shine and glitter like gold before everything goes dark.
Remember, block-chain is a wonderful technology and it is here to stay, but bitcoin and crypto currency is not.