Cryptocurrency Explained

Cryptocurrency Explained

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Posted 2022-01-25 by T. A. Rosefollow


Cryptocurrency is very interesting to the general public because there is much publicity about it and it makes people many millions of dollars. I feel that I am always hearing good publicity for it so this article is about giving a balanced view on the topic. In terms of jargon, it's a very gentle introduction to cryptocurrency and ever-so-slightly reveals its pitfalls rather than rejoicing its success stories, but both potential investment situations are indeed discussed and accepted as part of investing in cryptocurrency.

In terms of get-rich-quick, this article is less gentle and could easily be a hard landing for people hoping to get rich quick. Aspects such as cryptocurrency's high risk combined with the fact that the pricing is still based on supply and demand, markets crash at times, and confidence helps drive it higher, making it a painful read. Eventually, I conclude that the success stories are gaining indirectly from less fortunate or less skilful investors.

High risk

According to the Australian Government's moneysmart.gov.au, , it can be seen that cryptocurrency is high risk. That is due to its volatility. The Reserve Bank of Australia's website reveals cryptocurrency as having low intrinsic worth due to not being a genuinely legislated form of currency, as opposed to the Australian Dollar - the national currency of Australia.

So how do the success stories work?

The blockchain technology behind famous cryptocurrencies such as Bitcoin simulates the effect of money. The problem is that it's not government regulated because it is contemporary (Bitcoin was launched in 2009) and thus has similarities to a pyramid scheme. But the lure and charm of it is that it is clearly too tech-savvy to be a pyramid scheme, thus that combination of allure, get-rich-quick and hard to legislate for means there will be winners and losers and when some people play it well and 'win' by selling much higher than what they paid - they can duly convert some high sold cryptocurrency for a national currency such as US or Australian dollars. Naturally, they then appear as very rich indeed, in fact, they are very rich at that moment. Cryptocurrency's problem is such winners are the losing investors who sell or buy at the wrong time.

Forbes.com shows that blockchain technology is very tech-savvy thus it led me to realise that it can be written about as very attractive. Yet ultimately it's really too complicated to understand unless you have specialist technical knowledge, such as algorithms, computing and advanced math. It can be advertised as about doing one's research, yet, it can easily be shown oppositely to be virtually 'the luck of the draw'. Its positive aspects are often used to sell media content as well. The media can make cryptocurrency look great when they could instead be giving people advance notice of its over-complicated side. Such complexity of the technology behind these cryptocurrencies hint that research will likely not get you anywhere, however, how buying the right coin, at the right time, and then selling at the right time gets one everywhere.

It becomes easy to see how the success stories work. Investors selling or buying at the wrong times indirectly fund the investors in any success stories buying and selling at the right times - the principle of supply and demand still works for cryptocurrency pricing, hence if there is less confidence in purchasing such assets then the price goes down. The investors do display skill if they know where to look but I think in that instance, luck is in knowing where to look due to lack of government intervention, it's not really a 'fair playing field'.

My issue is the sheer gain involved for selling at the right time is so high, that it lures many investors who are essentially making it into a lottery. Although that to me is the best research one can do - to figure out such a market has the effect of a lottery. This is in contrast to a conventional share price and/or currency - which are sturdier in many ways such as being supported by governments and their laws along with less volatility to unit prices and by being far and away more established thus far more 'tried and tested', are more safer for investing.

Conclusively

This article discussed cryptocurrency as good and bad as an investment and it described the possibilities of buying and selling at the right times for huge gains, but it also shows the effect of buying and selling for huge losses. Remember that cryptocurrencies in fact simulate money, so there is as much luck involved as hard earnings and thus, it becomes possible to 'make it big' and be a news story but it also can have devastating effects on personal finances.



On a more general note, there are many things that can add worry to one's personal finances, such as scams, manipulative individuals and just poor money management and genuinely tempting concepts such as luxuries and new ideas to invest in -should you choose to invest in cryptocurrency at least try to take all the above into account.

Photos used in this article were sourced from pixabay.com .

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83683 - 2023-06-11 06:44:34

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