Cryptocurrencies, between universal payment method and gambling or PONZI scheme
The most balanced opinion on cryptocurrency investing
By Marius Morra, CEO and Co-founder of TOKERO Crypto Exchange
From payment method to investment asset
In recent years, cryptocurrencies have attracted the attention of the financial world, both from investors and spectators, causing extremely polarized opinions. From crypto maximalists who believe they will revolutionize the global financial system with Bitcoin or another cryptocurrency as the sole payment method, to those who consider cryptocurrencies to be pawns, gambling, a scam or a pyramid scheme, public opinion is quite divided.
First of all, for context, the creator of Bitcoin, Satoshi Nakamoto, introduced Bitcoin as a decentralized electronic currency, created to enable direct transactions between parties without the need for financial intermediaries such as banks.
As Bitcoin and other cryptocurrencies have grown in popularity, they have gradually become, in addition to being a payment method accepted by individuals and businesses, an investment and store of value tool for many people around the world. The main factors driving this were, in order of importance:
– The possibility of unimaginable returns on other investment asset classes amid increased volatility;
– Ease of trading due to the increasingly simple interfaces of other trading platforms;
– The accessibility of investments through the possibility of investing small amounts, starting from 10-20 euro or even less;
As enthusiasm and adoption grows, so does the wave of distrust or even hatred: critics state: “Crypto is a SCAM, scam or even slot-machines. Don’t invest because you’re going to lose money, cryptocurrencies have no hedge.”
Let’s deal with these charges individually:
– „Crypto is a SCAM”. Here the main problem is generalization. At this moment (26.05.2023), according to CoinMarketCap.com there are 24,817 cryptocurrency projects. Yes, among them there are also weak projects or even possible scams, but this depends only on the founders of the projects, which are different in most of the projects, not on the technology. Bitcoin for example is already 15 years old, a huge market capitalization, so a very good track record. So is Ethereum, the 2nd largest cryptocurrency by capitalization, with a market age of almost 9 years; and the examples can go on.
– “Don’t invest because you will lose money”. If we were to follow this advice, we should not even invest in the classic stock market where, according to public studies, an overwhelming majority – 85-90% of investors lose their money. Or in start-ups where only 18-20% of companies survive. Let’s not talk about insurers or even big banks that lately, that have gone bankrupt despite strong regulations in these areas.
– “Cryptocurrencies are not hedged in anything.” Here we will be brief: Bitcoin has behind it “proof of work” – miners who validate transactions with expensive and energy-consuming equipment that costs, from production, installation to maintenance. And most importantly, behind the projects is BLOCKCHAIN TECHNOLOGY, this Internet 2.0 that is starting to be used in more and more fields.
So, after all these arguments, I think it’s time to place cryptocurrency investments where they belong – at the top of the investment pyramid, at the top of investments according to risk level. Investment assets with a high degree of risk, but without a doubt assets. No SCAMs, no slot machines.
The Pyramid explained? If at the base we have investments perceived as stable or much more stable – deposits, government bonds, real estate, in the middle precious metals, stocks, bonds and ETFs, then, towards the top, the area of investments in startups- uri and crypto.
Cryptocurrencies, in turn, can be divided into risk levels – based on the well-known Bitcoin and Ethereum, the 1st and 2nd places worldwide, then cryptocurrencies from the top 100 and at the top the so-called GEMS – undervalued projects with massive potential. Beyond the line, in the area of gambling, we can agree to leave the so-called “shitcoins” – useless cryptocurrencies, created without a specific purpose and whose future is extremely uncertain. DogeCoin, Elon Musk’s favorite meme coin may be the exception that proves the rule. And newer $PEPE.
(to be continued in the next edition)