No matter how much your frivolity seems attractive to you, do not overstep it. For several years now, I have been looking at the situation with the Bitcoins and I expect that the whole process will simply collapse. However, the collective madness surrounding the new crypto-currencies is beginning to resemble the Golden Fever Worldwide. I realized that the whole situation got out of control when my mailbox was flooded with financial stories and issues that were reduced to one, that is, whether they should invest in crypto-currencies or not. We'd better start with the answer: No, do not invest money in Bitcoins.
First, because the purchase of crypto-currencies is not an investment, such as buying gold, lilac buds or baseball cards. They bought all these people earlier and at absurdly high prices, but not because the objects are of some benefit or they can produce money or some social value, but only because people thought they would sell them in the future to someone else at a much higher price.
When buying such items - what you should not do - you, in fact, speculate, which is not a process that can bring you any benefit. It is a psychological struggle with other people whose main goal is money that one party gets and the other loses. Even if, by luck, you make money, you lost time and energy, so, finally, you lost.
Investing, that is, an investment is the purchase of some value that can create a product, service, or cash flow, such as a profitable and profitable business or some property that you could issue for a longer period of time. The investment is something that has an essential value, that is, it is worth having it from a financial point of view, even if it is never sold.
In order to answer the question of why Bitcoins has become so lucrative, we first need to separate the useful use of technology that is at its base and is called a "blockchain" of the ruse of people who have turned a Bitcoins into the most meaningful lottery. The blockchain is simply very efficient software (open source, therefore available to anyone to use it), while Bitcoin is just one, but most popular use.
The blockchain is a computer protocol that allows two people (or machines) to perform transactions (sometimes anonymously), although there is no trust between them or they do not trust the network through which they are connected. It can be used for monetary purposes or for file sharing, but it's not magic that will turn you into a billionaire in a moment.
Let's take an example that you can read on a blog that the author calls himself An Unassuming Banker and which compares blockchain and Bitcoins with a real-life example:
Imagine that someone found a cancer medicine and, gradually, step by step, described the process of making a drug and posted it online so that everyone can read and use it. Imagine, then, that the same person made a product that called the Anti-cancer pill according to its instructions, protected the brand and started selling it to those who offered it the highest price.
I think we can all agree that cancer drug is of invaluable value for society (blockchain maybe it is, maybe it is not, we'll see), but the question is how much that pill costs. Of course, the first pills against cancer (Bitcoins) are initially excellent for sale. The price rises, especially if the offer is limited (such as an artificial limit on the offer built into the Bitcoin algorithm). However, since the formula for production is free and free, other companies soon enter the market with their pills to cure cancer and give them different names, like Cancer-Ethereum, and so there are many competitors. Everyone can make a pill that now costs only a few cents for a single dose.
Imagine now, that I have nothing to do with it, everyone begins to compete for pills worth $ 17,000 and prices are constantly changing, again for no reason. Newspapers begin to report daily on the prices of pills and give you stories about how to get rich quick and overnight. Even your barber and butcher have advice on investment in this new "class values". People, instead of understanding the meaninglessness of the whole process, begin to compete for each new type of pill (cryptocurrencies) that makes them the "most valuable things in the world".
The same thing happens with Bitcoin, whose value in the market is 238 billion dollars, and the Ethereum 124. The invented value of these worthless pieces of computer data represents a sufficient amount of money that could change the course of human development, for example, completely abolish poverty or solar Replace the coal-powered power plant with energy. Bitcoin (or cancer pill) has become an investment flaw that is fueled by the strength of human behavior in the crowd, greed, fear of not participating, and misunderstanding of previous financial fraud.
In order to better understand this, we would be best to consider why Bitcoin was primarily invented.
The story says that in 2008 an unknown programmer under the fake name Satoshi Nakamoto published an official document. The author was obviously well versed in mathematics and software engineering. However, the document contained a certain ideology: the assumption that we made a mistake when we allowed the national government to monitor the flows of money in the financial system and use it to enforce the law. So at the center of the battlefield, there is an idea of financial freedom that runs through all the blogs and considerations of crypt supporters.
Those who think a bit more seriously will say: "Yes, the twenty most developed countries of the world have stable financial systems, but the battle can save countries like, for example, Venezuela, in which the government can completely overthrow your money overnight." Strict experts say: "All those who work in the US Federal Reserves are first-class fraudsters who sneak you over inflation, and printing money is no better than ordinary toilet paper!" The same thing people talk about gold - another way of seeking human investment energy.
Currencies issued by governments of states have value because they represent human trust and cooperation, and without these two there is neither wealth nor trade. Another argument for the value of Bitcoin is the fact that in the future they will only be 21 million and will eventually replace all the world currencies, or will become "new gold", so the base value will be either the whole world GDP or the total value of world gold divided by 21 million. People who believe that there is little chance that Bitcoin becomes the world's currency is said to be terribly underestimated. You can tell all this about the pieces of nails I cut out: they may not have essential value, but the offer is limited, so why not use them as a new world currency.
In serious consideration, it should be pointed out that the Bitcoin needs to fulfill the following conditions in order to become the real currency:
- Enable simple and unimpeded trade among people.
- It is generally accepted as a law tender for all debts, public and private.
- To become a stable currency that does not change value every time.
Not only does Bitcoin have none of these characteristics, but its safe storage is also quite inefficient. Moreover, many exchange offices and wallets (Mt Gox in Japan, Bitfinex and many others) have been hacked several times. The second argument is the most important. Bitcoin will have value only if it becomes a critical world currency. In other words, if you really need to buy something, if you have to buy them from a person who sells them to perform an important world trade process because it can not otherwise be done. For now, only those who deal with speculation raises it.
Such fictitious currencies have value only if they turn into real money, such as the US dollar that buys something useful, says, a beautiful house or a lucrative job. When the speculators disappear, the value of the invented currency will disappear - mostly very quickly. Currency, too, should not be artificially limited. It should be as big as increasing the supply of goods and services in the world, otherwise, we will find ourselves in deflation and a sick collection of things. Therefore, there is a system of federal reserves and other central banks that manage the system.
And, finally, nothing can be a good investment just because it's growing in value lately. Governments of the countries of the world will certainly not allow anyone to anonymously trade in money and avoid tax using Bitcoins. A sudden increase in crypto-values can only occur with the help of a government of a state, as is the case with the new Fedcoin currency, but complete anonymity and avoidance of state procedures will certainly not be its characteristics. In fact, fraud with crypto works has already been seen. This is a known error in our operating system, and we have made some parts of our society that can protect us from it.
Today, stock trading in the United States is strictly regulated, as long ago, shares that resembled Bitcoins were long gone and sold to inexperienced and gullible investors as a good way to quickly get rich. We could define such an investor with a sentence: "He is more willing to buy anything only if the price of it rises."
Do not be a gullible fool.