Did you know that if you invested $100 in one of the better-known cryptocurrencies eight years ago, you would be a multimillionaire today? That’s easy to say now! Don’t worry, I missed that boat, too. It was 2015 when I first learned about cryptocurrencies. I was reminded years later, but I still didn’t buy them. I’m a crypto pessimist. As a cynic, I always see the negatives, and in my analysis of crypto investing way back then, I always thought crypto investing is too risky. This blog post is an introduction to crypto investing from a super-rational, skeptical perspective.
I’ll begin with why I didn’t buy in 2015, or 2017, or 2020. My business is mostly focused on financial institutions, which are highly regulated and comfortable in their monopoly on money. I never believed that cryptocurrencies would get around the banks and make it to where they are today. Crypto evangelists believe Bitcoin will continue to grow and be worth millions in the future. I don’t believe it, and I’ll tell you why in the coming paragraphs.
What is a cryptocurrency?
The word “crypto” comes from encryption, which is a mathematical approach to protect information. Cryptocurrency is digital money created in digital format for digital exchange; they exist only on the Internet and are not issued; they are not controlled by any central bank or state (for now). There are also only a few ways to use them as currency. It’s more like gold and precious metals, where you buy and hold.
Just as you have your money in a bank account, you have your cryptocurrencies in your “digital wallet” on one of the websites that provide this service. Every transaction you make has a highly organized digital record. The record is a file consisting of the number of cryptocurrency units transferred with specific public and secret keys of the sender’s and recipient’s “digital wallets,” digital wallets are best when they are on a local drive you own, but they can be on one of the digital wallet services provided.
“Keys” are passwords that are more complex than the ones we use to access online accounts like email or banking. Each transaction is signed by the sender with their private key. When a transaction is confirmed, it’s recorded on the network. No one on the network can see the private key.
The difference between a cryptocurrency transaction and a credit/debit card transaction.
When you give your debit/credit card to a merchant, you give them access to the entire credit line, even if the transaction is done for a small amount of money. With credit cards, the store initiates the payment and withdraws a set amount from the account.
Cryptocurrencies allow the holder to send exactly what they want to the merchant or recipient without any additional information being shared. Cryptocurrencies do not require a name, only a digital wallet code or key, there are no third parties, delays in payments, or payment fees. In 2023, spending your currency could result in a tax liability, so before purchasing with Crypto, make sure to know what the laws are.
What is Blockchain?
The main or public “book” where all transactions and value changes of cryptocurrency units are recorded is called the “blockchain.” Each record is based on complex mathematical cryptography, written in sequence, one block of codes after another, creating a chain of blocks. It is not possible to change the data in the chain.
Blockchain is not in one place; everyone who owns a unit of a cryptocurrency has their own copy of the “blockchain book,” it’s synchronized among all computers connected to the network.
What is “Mining,” and who are “Miners”?
The “blockchain” system consists of computers connected to a network that confirm/verify transactions. “Miners” are people (sometimes a set of people or businesses) who voluntarily provide their computers and computer processing of their “digital wallet” data in order to confirm a set of transactions carried out in the payment book, or “blockchain.” They receive cryptocurrency units as payment. Without miners, the blockchain system would not work as efficiently.
Mining is the process of confirming and adding new transactions to the blockchain. This means that without heavy computing ability, including heavy uses of electricity, the blockchain would slow down due to fewer miners seeing the benefit, ultimately taking the legitimacy out of the transaction.
Unstable Crypto Market
Owning a unit of cryptocurrency is like owning gold, value fluctuates based on market valuations; typically, when fiat currency is vulnerable, you will see gold go up in value, and crypto follows the same trend.
The author George Gilder claims that the value of crypto will match gold in his book the “21st Century Case for Gold.” The projected gold market cap is between $2.5-3 trillion. Today, the Bitcoin market cap is at $647 billion.
Bitcoin was the first cryptocurrency and has remained the most popular. The value of one Bitcoin in 2010 was $ 0.003. By May 2018, the price of one Bitcoin was over $ 9,000; however, as early as the summer of that year, the value dropped to $ 7,000 and then continued to fall. In 2020, the price was around $7000; in 2021, it was at $35,000, then made it up to 60K. The Bitcoin price continues to be a general indicator of market movements in crypto markets. As of the last quarter of 2023, it’s around 27-28K. That’s a big shift I would be weary of.
There are hundreds of other cryptocurrencies, and new ones appear almost every day. Some survive and grow, most die out, some are scams, some are genuine, and the growth of the crypto market is steady.
Keep in mind that not every cryptocurrency is equal. Their systems are not created the same way, some do not use a blockchain system. Their value can grow rapidly but also fall just as rapidly, it’s important to be well-informed and research all the details before making any investment in cryptocurrencies. Don’t buy from Instagram profiles or e-mails speculating overly embellished returns. Look at how much money these coins have in their reserves and how they run their business, and find out what their long-term goals are. Get good at sniffing out the crooks. Ask yourself, if they get a call from the FTC (Federal Trade Commission, which protects consumers), can they pass the test, or will they be shut out of the market when their executives are found to be running a Ponzi scheme?
You can track the values of different cryptocurrencies on a variety of websites that provide crypto services. Coinmarketcap has up-to-date rates and an index depicting trends.
Another Investment Consideration
The growing interest in cryptocurrencies is increasing the need for crypto ATMs and exchange offices. In 2021, there were almost 1,800 of them in 58 countries worldwide. In 2023, it seems that scammers and their victims are using these most often, so I would be cautious of regulations in the future.
The Bad News
There is a lot of bad news. The increased popularity of cryptocurrencies is encouraging regulation. Existing financial regulations are not designed to include crypto assets; their legal and regulatory status will be assessed within the coming year or maybe years.
The US treasury Secretary suggested lawmakers “curtail” the use of Bitcoin amid terrorism concerns. in January 2021
Tax authorities and regulators around the world are trying to control crypto, possession is prohibited in the countries (Bangladesh, Bolivia, Ecuador, Kyrgyzstan, Vietnam, and Russia and China are on the verge of being banned).
That’s crypto now, back to why I didn’t buy in. I know a lot of crypto investors; they have been trying to convince me to buy since 2015, and most of them have been buying since 2013; they are miners or investors. I was always hesitant, I assume that eventually, the banks will force the authorities to regulate them, then what’s the point?
The whole point of crypto is freedom to trade within the community structured regulation, which is outside of the control of the establishment. Remember I mentioned the monopoly on money? When crypto is regulated by institutions, banks, and governments, many crypto users, if not most, will leave the market. I’ve believed that established cryptocurrencies will eventually be in the control of the banks.
I could invest and then expect a downturn in the future when regulators get the control over it, but there is always what if. What if I’m heavily invested and lose it all? What if I let it all stay right there, and a rug pull happens? If I’m in Bitcoin and Ethereum, the two biggest, then the what if might be big, sure I could win, but I could also lose. I love my free, easy-going life, I travel a lot, and I enjoy free time and work when I’m needed. I don’t want to research daily to make sure my investments are stable. I don’t want to worry about it. I invest in businesses that are stable and secure depending on the economic environment, I take a look twice a year, and, other than that, I leave it. That’s my way. If you prefer to be very involved and want to risk big, then know your risk. That said, there is a lot of money to be made right now, if you have extra money or money that you don’t care to lose, then go for it, but make sure to stay away from scams. Subscribe for more investing posts. Have a lovely day.
Disclaimer
I want to make it unequivocally clear that I do not promote any cryptocurrency, nor do I endorse any crypto investments. This website is dedicated to providing information and insights into the world of cryptocurrencies to help you better understand what crypto is. If you ever find yourself in a position where you need to explain your decision not to invest in cryptocurrencies to friends or acquaintances, you can use the content on this site as a guide to discourage people from falling victim to scams or making hasty financial decisions. My ultimate goal is to empower individuals with knowledge and awareness so that fewer people become financial victims. Life is already challenging with its inherent obstacles; we don’t need the added burden of unscrupulous individuals looking to exploit our hard-earned money. Stay vigilant, stay informed, and make financial decisions with caution. Your financial well-being is of paramount importance, and it is my sincere hope that the information here can assist you in making prudent choices.
