Anything wrong with crypto (1/2)

Many (especially young people) still seem to believe that crypto trading is the way to make money without actually having to work. And that’s just one of the things I think is wrong with crypto. Time for a reality check.

After this article by Emerce wondered aloud whether Crypto was still trusted, the crypto world has been shaken in recent weeks. Moreover, it seems that the hype around NFTs is particularly popular in Thailand, Malaysia and the frontrunner Philippines. Adoption in Western countries is hesitant, for who wants to end up in a Disney scenario with WALL-E?

In this article, I highlight how the crypto world is associated with sinister, unethical, environmentally friendly and above all unfair things. This affects not only the housing and labor market, but also the capital market, starting with the pressure of a new relaxed generation philosophizing about a possible way out of the five-day work week by achieving economic independence with passive income. Surprise: it’s just going to be hard work though!

Good times create weak generations

Many people not only find a five-day work week annoying, it is also no longer something of this time. At least that’s what more than half of Dutch young people think, according to the WNL. This idea stems from a time when there is more prosperity in the Netherlands than ever before. If you want to work, you can work. On the other hand, if you want to start your own business, you might as well. With economic prosperity growing since the lows of 2012, there is greater purchasing power. And greater purchasing power statistically means greater chance for buyers to invest: money simply has to be moved. And due to the scarcity and low interest rates for good investment opportunities, real estate and crypto are a good example of this.

The self-proclaimed gurus also grow in abundance, which will sometimes guide you to coach your own investment portfolio. From real estate gurus to portfolio coaches and from day trader– or Forex courses for crypto communities† Everyone wants to make money, but no one wants to work for it anymore. The jobs that remain open are often underpaid or too labor intensive. The hospitality industry or education seems to be losing weight here. But let’s face it, a risky position in a share or buying another home by increasing your own mortgage: Isn’t it much more relaxed? Besides, it’s not a problem: the economy is running like a Malaysian and house prices are always rising, right ?! Until the cryptocurrency crash in early May.

Weak generations create hard times

We have to wait until another crisis comes, so that people naturally feel like a more stable income. It is a typical monopoly game: When the money comes out of the soups, we can all take a bet on Kalverstraat, but as soon as the tap runs dry, we will soon build houses in Het Dorp again. Ultimately, everyone is looking for security in an uncertain market. It is certainly possible by investing in a pile of stones or gold, but the prices of these are currently so high that the return is no longer as strong as it used to be. Fortunately, there is still a last resort: a growing group of users are looking for a way out into a virtual world.

crypto

Once conceived as the people’s independent payment system, with blockchain as the center of transparency. No big banks that will sometimes invest your hard earned money for you, and especially no government that meddles in your assets. It sounds like a win-win situation. But you have to be crazy if you think the US bank and US government will one day replace its own dollar with a fictitious currency. These were the words of Warren Buffet at the Berkshire Hathaway General Shareholders Meeting (2022): “if you think that […] you must be out of your mind ”.

Unfortunately, these days, cryptocurrencies are primarily there to cause harm to people and the environment. As already mentioned in the well-known Evening Show with Lubach, it’s not about the tech nerds from Silicon Valley who came on time and have now been able to make tons of money. These are ordinary citizens, mostly young people. No less than 27% of Dutch young people own or have held a position in a cryptocurrency. This has increased rapidly since RTL wrote about this in 2018.

Happiness thinking or long-term vision

As most people know the crypto world, this is the way to convert € 1,000 (preferably fast) into € 100,000. That would be a growth of no less than 10,000%. If we look at it in the light of the value development of, for example, Bitcoin, we see that someone really should have stepped in irrationally early and also had to sit there for so long, in order to make this return. The romanticized idea that such a long-term investment will happen again is almost impossible. As an example, someone who came in in 2016 worth around $ 500 would have had to sell for a return of 10,000% at the peak of 2021 to make it to $ 50,000. So anyone who is now in favor of the current value of € 30,000 expects an increase to € 3,000,000? Very rational…

sliding money

In addition, there are also many smaller cryptocurrencies used in a completely different branch of the sport: day trading. Usually in day trading, the market with investors is so large that a single move cannot affect the market (unless your last name is Musk). This is not the case with crypto. In fact, chats via Reddit and Telegram are often pre-arranged so-called pump and landfills organized with thousands of participants simultaneously.

Instead of determining the value of a stock based on market demand and company performance, this is more like playing red or black in a casino, albeit at least one night of fun. Often the organizers are behind one pump and dump entered into much earlier in advance so that they can exhaust the maximum growth of the crypto. As soon as landfill takes place, loses coin not only its market value but there are also lots of investors selling too late. It is therefore not the case that more money comes into the drawer, but simply that the money moves from one hand to the other (with the necessary intermediate transaction costs and fraud

It’s not a strategy to invest, but simply to take money from bad players, mostly young people. If there are 1,000 people who all invest € 1 and there is one person who says ‘now you have to buy and now you have to sell’, then there is no value creation but a change of value. Nothing is created, only changing. Unfortunately, it’s not just a thousand, and unfortunately it’s not just € 1.

The bottom line is that there are 999 losers, all of whom will say it was worth a gamble and that it was only a small bet. However, one winner returns to Instagram and TikTok to ‘inspire’ a new group of young people with expensive cars and beautiful villas. Once this group is found, they will rejoin the ‘community’ and pump them the next crypto.

even more wrong

Is something else wrong? Yes definitely! Read the rest of my speech here tomorrow.

About the author: Bart van Eekelen is the founder and director of e-pickr.

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