The crypto world is crammed with various threats and warning signs on all sides. Almost half of the ICOs born last year have collapsed, many of the existing projects are outright scam and their initiators will never create the real ones.
The stories of cryptocurrency billionaires have little credibility: In early May, a Ripple co-founder, Chris Larsen, was reported to have a fortune of $ 59 billion, causing him to surpass Mark Zuckerberg. But the crypto market crash that followed depleted it of $ 44 billion. Sounds not entirely safe, right?
Another almost fabulous case of the anonymous creator of Bitcoin, Satoshi Nakamoto, can also be remembered, not yet identified with a great wealth of cryptocurrencies in his account that can negatively affect the market.
What about the bots Markus and Willy that levelled the bitcoin price from $ 150 to $ 1000? This all resembles a Hollywood movie and people have to take it into account, movies like this usually end with a small group of people getting rich, while the rest go back to where they started.
Despite the fact that many people consider cryptocurrencies to be a great democratic power that allows funds to be managed independently of banks or states, this market is actually under the control of a limited group of individuals.
Up to 40% of all bitcoins are owned by just 1,000 people. So cryptocurrencies are more like a great multi-level marketing scheme than the currency of the future.
How do these schemes work? Any asset must be in demand to be of value. To increase demand, you have to attract new participants.
Is that how it works. Previous members’ income depends on the number of people invited, so their wealth grows as the scheme becomes more popular.
As experience has shown, such projects come to an end when there are too many participants, causing the whole scheme to collapse. Everyone except those who started it is left with nothing.
Is cryptocurrency really such a scheme? Those invested in specific cryptocurrencies are looking to attract new members for each increase in the price of the coin along with the demand in it.
However, the hype around the single cryptocurrency will not last forever and will eventually disappear. As a result, those who joined later are left in the dust while those who invest early win big.
There are currently 1523 cryptocurrencies with a coin of most of them worth less than a penny. But if this penny reaches a dollar value, the original owners of this cryptocurrency will increase their fortune hundreds of times.
The belief in the possibility of making easy money, especially with frequent stories about someone else who did it, keeps people from having a cool head. Trying to make money on instant advertising, many promising programmers create new cryptocurrencies.
Speculation is a shadow for the cryptocurrency market, with more and more prominent investors turning their attention to this fact with iconic market figures such as George Soros and Warren Buffet among them.
However, this leaves the cryptocurrency to staunch supporters undaunted: they still believe that this technology will replace fiat and put traditional banks at rest.
There are many exaggerated examples of something increasing in price, turning it into a bubble and eventually bursting. The most mentioned is Tulipan craze from the seventeenth century in Holland.
There are also more modern cases: In the late 90s, American businessman Ty Warner began making Beanie Babies teddy bears, and saw the demand to remain limited to make people believe that these teddy bears are rare.
The price reached thousands of dollars, some investors considered the toys as a new type of asset. Which it was the result? The bubble crashed, but it turned Warner into a billionaire with a fortune valued at $ 2.7 billion.
Some cryptocurrencies create the same situations and turn the lucky ones into millionaires only because they managed to convince a large number of people that they can earn the cheapest money there has ever been.
The innovative nature and technical complexity of cryptocurrencies allow oversight of the marketing scheme at various levels on a large scale. They existed before, the only difference is that now people acquire invisible coins instead of flowers or stuffed toys.