If you are involved in cryptocurrencies, chances are you’re not in the like to read this. Sometimes the reality of what is happening is skewed by the inner desire to make money. That is fair and I can completely understand the emotion behind wanting something that you are “investing” in to succeed.
The problem is what you are investing in may be Ponzi scheme after all and within this post I am going to assess Cryptos in a way that hopefully offers everyone some clarity.
Can You Make Money With Cryptocurrencies?
First, before I get started though. I do not invest in crypto currencies, simply because I don’t view them as an astute investment and I certainly do not view them as a long-term and sustainable investment.
In respect to being able to make money with cryptocurrencies, surely you can. There is actually a lot of room to make a great deal of money, as there is with any volatile investment that can be moved 30% in a day by news, or by sell offs/high demand.
Like anything though, whether you can make money with it does not “legitimize” it. It certainly does not make the argument for crypto any more solid stating that it “makes me money”, which tends to be the angle that most people and schemes out there are utilizing to try to draw people into either BUYING into an Initial Coin Offering (ICO) and existing coin, or into a scheme layered on top of a cryptocurrency (which in my view is the most ruthless of all).
You have probably read many stories of people becoming overnight millionaires with crypto currency. That is exciting to read about, and even more exciting to have happened to you.
The problem is, I can almost guarantee that these same people (or many of them) are going to have a story about how they have lost everything as a result of the crypto currencies either dropping overnight or being in a situation where they simply cannot sell during a drop with the hopes of it going up forever.
And it won’t go up forever, albeit that is what folks are telling you. I hear yelling of, “BitCoin to a $1,000,000!”….”Ripple going to be the replacement for fiat currency.”
It simply is not going to happen. And here is why.
Cryptocurrencies Real Value, ZERO.
What sort of value would you put on a “bit”. In other words, the actual exchange of cryptos and the value of them intrinsically is based on 1’s and 0’s, the make up of a currency and anything digital. The problem is, the only thing driving up the price of a cryptocurrency is the high demand, the very thing that will drive them down is lack of demand.
Yes, same to be said about the stock market, stock options, and other currencies as well. These investments typically have “assets” backing their valuation though .
When I invest in, say, Apple (AAPL is the ticker), I am in essence buying a portion of the Apple in hopes that their company will continue to create good products, will continue to grow, and will continue to pay dividends. If they fail, my initial investment goes down but I am buying a percentage of their assets, their intellectual prowess, their growth, and their business. Pretty powerful right.
Yes, there is supply and demand involved in stocks.
What about a house. I buy a house, it has value. It not only cost money to build that house, the land is worth something. And yes, there is supply and demand that will impact the price of that house, sometimes pushing it down below the price in which I could purchase it (like the 2007/2008 crash), sometimes so inflated that it is cheaper to buy land and build a house (in many areas, this is what it is like now).
But there is intrinsic value to my asset, to my purchase, to my investment.
When I invest in crypto currency, it is completely relied on supply and demand and there is absolutely no intrinsic value to my investment. It is 1’s and 0’s, it isn’t backed by any assets, the only value to me is someone that is willing to pay more than I paid for the cryptocurrency itself. That is how I make money from it, and the way that I lose money from it is if someone is not willing to pay that any longer.
This is a problem.
Cryptocurrencies are an Investment, Not a Currency.
For now. I won’t argue the usefulness of blockchain technology. There are some merits to it, but people tend to hide that as the core reason for using Crypto. It’s secure. Well, not really.
Fiat currency (country based currencies) are very easy to spend, and it is globally recognized as a form of payment. I can take a Baht, or a Canadian dollar, or a USD dollar, or a Rupee to a bank and get this exchanged to any currency that I like. These are fiat currencies and these are backed by the countries, not necessarily by gold.
Another straw man argument is that fiat is the biggest scam in the world. Well, we are all living in one big scam then, we spend fiat to purchase our houses, to purchase our cars, to pay for our vacations, to buy our groceries and to pay our taxes (which make our economies tick).
Yes, whenever you have government involvement they’re going be many things that you do not like about the currency. The fact that currency can be printed and distributed to banks can lead to things like inflation and an overall drop in the value of a currency.
They are REAL currencies though. You can spend them.
Cryptocurrencies are TRADED, they are not spent. The majority of the time they are being spent, its when someone takes their capital gains through “selling” their crypto to the next person, and exchanging it into an actual fiat currency. Hmm.
The argument is that it is a brand-new currency and its going to take some time to adopt, but the other problem is that there’re hundreds of these currencies popping up and they all carry the same ZERO value, and are based purely on supply and demand and or purely an investment mechanism, not an actual currency being used or spent anywhere.
It has been HACKED, many times.
Many people argue that crypto currencies are so much more secure because of blockchain technology. If you want to read about blockchain you can do so here. I wouldn’t argue that blockchain is not secure, it is incredibly secure. The problem is that you have many 3rd parties involved.
You have cryptocurrency exchanges, you have people making transaction, you have the hardware creators, you have crypto miners, you have merchants (that accept them) and you have agencies layered on top of all the crypto promoting pure SCHEMES trying to teach you how to make your fortunes on crypto.
So although there is security in blockchain, the platform, as there is with banking platforms, there isn’t security when it comes to the different entities that are involved in the transfer of cryptocurrencies and the PEOPLE that are involved in crypto.
Some of the shadiest, most unethical folks have moved their entire practices over to the crypto world.
The next argument is that cryptocurrencies are of great interest by largest onlinee retailers. They are the next to adopt Bitcoin or some alt coin, are they not?
Amazon WILL NOT Accept Crypto as it is Now.
People are speculating that Amazon is going to start accepting crypto. You would be wrong. I will tell you why.
On a good day, Amazon operates on a few points of profit. Meaning if they sell a fridge for $1,000, they may make $10 or $20 at the end of the day. They profit on volume, and they profit on building their customers list which is going to continue to create a great deal of opportunities for them as time moves on. I digress about the Amazon business model, as this is besides the point.
The more important point is that no stable retail company, online or offline, will ever accept an unstable currency. In particular one that does not easily convert into real money, something that has no regulation, and something that could lose almost all of its value without notice.
There is a surge in investment into crypto from large companies and corporations, but these are more “opportunistic” plays, rather than strategic business plays. Yes, a cryptocurrency may have a life inside the retail world at some point, but in its current volatile state I don’t believe you will see any penetration or adoption within the online retail world. It just doesn’t make sense.
Cryptocurrencies Cater to MOST People’s “Get Rich Quick” Mentality.
Most people want to earn money, without doing much. Being in the affiliate marketing industry for the last 16 years full time, and working with over a million people through the WealthyAffiliate.com platform, I have seen a lot of people that act out of desperation to earn money, or people that simply are not truly willing to work for money.
In fact, I have been drawn into the idea of “making money fast” over the years in the investment world. There are instruments such as option trading that allow for this, but the latest and greatest is the Cryptocurrency Space. Whenever you have this sort of opportunity and people promoting this opportunity, you have a large crowd of people “following the herd”.
There have some Cyrptoschemes recently shut down by the FTC and SEC as being Ponzi schemes and CoinDesk has recently reported that over 70 schemes have been shut down so far.
If someone is trying to sell you on a scheme layered on top of purchasing the actual alt coins yourself, then be careful. There is a very good chance you are getting involved in something illegal and if you then promote that illegal entity to someone else, you are potentially going to be liable for that.
Are Cryptocurrencies One Big Ponzi Scheme?
In my opinion, they are. The reason being that in order to get your money out of them and actually spend them, you need a newcomer on the other end paying for the crypto. There is a limited supply of most cryptos meaning that can inflate the demand for them, but the problem is they have no value.
The value to an investor is the idea that someone will pay more for your money than you did. To get your money out of it, you someone at the bottom rung to buy in with their “fiat currency” in order for you to cash out.
So if I am from the US, and I actually want to realize my profits, I have to find a buyer. That is fine for now, as there is a flood of people fearing they are going to miss out on this craze and are willing to pay $15,000 for a Bitcoin or $1,110 for an Ethereum coin, or $2.50 for a Ripple coin or xyz for ____ coin.
What happens when there are no buyers though? The value evaporates. That is a scary idea and this is why cryptocurrencies could be deemed as a Ponzi scheme. As soon as the “new blood” to the investment pool stops, the value of it crumbles.
As you are probably realizing, I am not a huge proponent for cryptocurrencies in its existing state. I do see value in the technology indeed and it will definitely evolve, but we are living in a current state where a lot of people will make a lot of money, a lot of people will lose a lot of money, and a lot of scams will be created out of the opportunity inside of crypto itself.
Would love to hear your thoughts, feedback and insights into crypto.