It would be hard to live today and not have heard a lot about cryptocurrency. All the hype finally piqued my curiosity and I decided to look into it.
The first thing I noticed was the name. Anything starting with crypt isn’t going to give me a warm and fuzzy feeling. A crypt is an underground chamber, usually for burial under a church floor. Cryptic is hidden or mysterious. A cryptogram is a communication in code. Well, you see my point.
However, I decided to press on and study this as a potential investment. The first thing I learned is that to even have a minimal understanding of cryptocurrency one must learn a new language. Clouds, wallets, miners, and a dozen other words lost former meaning and took on a new life. Languages have never been my strong suit, but I persevered and managed to get a somewhat workable understanding of this foreign turf.
Many people were making a lot of profit on paper, but something still bothered me about this phantom currency. Finally, I got it.
Making money in cryptocurrency relies on the greater fool theory. That theory states that whatever you buy, at whatever price, there is always a greater fool than you that will buy it at a price higher than you paid.
Other investment vehicles have value and usually a return on your investment. Debt instruments like bonds, notes, and certificates of deposits pay interest. Stocks in a company that produces a product or service are underpinned by assets and often pay a dividend. Real estate has a book value and can provide rents and products. Fiat currencies (those produced and sanctioned by a country) are underpinned by the full faith and warranty of the issuing government (such as that may be) and are accepted in all economic transactions.
Cryptocurrency offers none of the above. Okay, I admit that there are a few cases in small countries where crypto has been deemed acceptable for economic purposes. However, I don’t think you are going to buy a ham and loaf of bread at your favorite grocery store with cryptocurrency anytime soon.
Bitcoin, arguably the most famous and costly of the crypto money, rose to somewhere around 62,000 per coin. Hopefully, those on that ride-up cashed out along the way because it is now in the range of 19,000 per coin.
Not wishing to run the risk of being one of the greater fools, I intend to sit this one out.
Yes and I think Barnum was right. It has been proven over and over.
I have to agree with Danny that you take a risk in a lot of things these days, but just the word “crypto” makes me anxious. Good article Ken
Thanks, Lynn.
Wise advice Ken. I feel the same way with anything starting with the word “crypto”. It’s like a timeshare that looks mighty good upfront and then it becomes less attractive as time and treasure disappear. I recall the words of the great entrepreneur and showman huckster, P.T. Barnum: “You can’t fool all of the people all of the time, but you can make a pretty good living fooling half the people half the time”.