It is clear that the cryptocurrency boom has arrived, there is no talk of anything else. It has gone from being something that only a few used (one could say even for fun) to being used by practically everyone with the main purpose of making money by investing in them. But… Are cryptocurrencies a bubble?
Short answer: no, long answer…
We must go back to the time of the creation of bitcoin, 2008. One person (or several) under the pseudonym of Satoshi Nakamoto created what would be the first cryptocurrency under the blockchain network, a decentralized cryptocurrency that intended to make complaint of the current monetary system, the so-called FIAT money (Euro, Dollar…).
Under the premise that your money is really worth less and less due to the constant printing of money and the consequent inflation, bitcoin was a step forward, making it clear that it was intended to be a substitute for the current system, leaving control in the hands of each user and not the banks.
Of course, back then it was something that only a few freaks were willing to try and most of them after mining for a while for fun forgot about it. Many of them today are millionaires, some have lost their wallet and have done the impossible to recover it… But those are stories that I can tell you another day if you want.
Having told the story in a super short way, let’s go back to the current era, the era of the digital boom. And it is here where a very human trait comes into play that makes us ask ourselves the initial question, and it is none other than the aversion to loss. This trait, called FOMO (Fear Of Missing Out) makes many people without prior knowledge enter the arena, losing money along the way just for the mere fact of not being left behind and losing the opportunity to make gold or earn some money with the investment.
It is that kind of thing that makes people think they are a scam, it doesn’t help either the high volatility they have. Of course, it is precisely that volatility that can make you earn a lot in a relatively short time and that attracts the attention of people who still do not want to see the other side of the coin of such volatility, you can also lose a lot in a short time…
Neither does it help the proliferation of real scams such as the squid game currency (created by people outside the brand), which only made its creators rich, because once it reached a certain value they sold and closed the centralized blockchain network they used. Hence it is important to investigate well in the investments that are made or are going to be made, whatever type they are (cryptos, stock market…).
Likewise, events like seeing people become millionaires overnight with meme coins (see Doge, Shiba…) only attract the attention of even more people who don’t want to miss the wave, not knowing that many of them bought at very low values and counted on luck factors like Elon Musk using his influence to inflate the market by taking the meme further.
But then, if you say they are not a scam… How do you distinguish those that are from those that aren’t?
Here comes into play what I mentioned about the research that everyone has to do regarding the investments they make, no matter what type they are. In the case of cryptos there are several things we can look at when deciding whether or not it is worth investing in that currency.
The first one is the simplest and at the same time the least reliable: enter the currency’s website and check its contents. There they usually show the roadmap they intend to follow, the technologies they use or are going to use, the main shareholders if they have any, companies that already use their technology… And if I say that it is the least reliable, it is for something quite logical, because as the content is written by them, it is possible that the vast majority of things are merely smoke and mirrors to capture the unwary.
The second one links from the first one, because we will check with external sources to the currency web, that the content that lies in it is true. That is to say, to verify that they really use X or Y technology, to see which companies implement it and how useful it is for them… In short, do field research and find out that what they say they use and have is really true.
Another thing you can do is to ask people you trust who you know understand the subject or are already investing in the currency you want. Don’t be afraid of looking foolish, nobody is born taught or has the absolute knowledge of everything, and maybe that person has done a good research and gives you a different point of view or has information that you didn’t know.
Of course, make sure that this person is a reliable source of information and for that there is nothing better than having a minimum knowledge base about what you are going to invest in. Because we are human and even the smartest and most reliable can fail.
Okay, I’ve already done my homework… Anything else to consider?
Well, yes, and if something has the market is that (in general) consumers are the ones who regulate it, and cryptocurrencies are no different. If something is no longer needed or used by people, it will disappear over time. This means that, in this case, if a cryptocurrency ceases to provide value and is just another clone trying to jump on the bandwagon, it will eventually disappear. Coins that have something to contribute will prevail, either because of their philosophy, their technologies… So do not be surprised the day you no longer see the current huge list of existing cryptos and you see that the market has only a few… That is natural regulation.
The price will also end up being regulated, in fact it does so already, only with high volatility because we are dealing with something relatively new. But over time it will become more stable and in this case, also thanks to consumers. Because there is always a price that we are not willing to pay and when that ceiling is that of the majority, the price falls irremediably. Surely the same thing will happen to it as to the stock market, reasonable rises and falls based on its price (of course, for this scenario there is still time left).
Finally, in my totally subjective opinion, I believe that bitcoin will end up being a value safe haven like gold and other cryptos such as ethereum or some stablecoin like UDST can become currencies of daily use and a good substitute for FIAT currencies. But well, I repeat it is merely my own opinion without any basis to back it up (it is always fun to try to think where the future will go).