From the highest of highs to the lowest of lows.
Essentially, that’s crypto in a nutshell. And I’m not just talking about the price. That goes for emotions too! Investor sentiment is all over the place right now, so this will be an attempt at clearing the cobwebs.
You’ve most likely seen (and heard) the commotion cryptocurrencies created, and there’s a lot to cover. So, without beating around the bush, let’s jump into it.
We’ll compare a couple of concepts to set the stage.
Cryptocurrency vs. Blockchain
If you can’t tell the difference between cryptocurrency and blockchain, you’ll fail to grasp the true meaning of this.
Crypto, is a financial system that deals with digital assets. The more popular words you most likely hear are Bitcoin, DeFi, Smart Contracts, and other things of that nature.
For the sake of this moment, those don’t matter.
Blockchain is the underlying technology that cryptocurrency is built upon. So, without blockchain, there is no crypto. Simple.
Blockchain technology can also be considered DLT (distributed ledger technology). It’s synchronized digital data for everyone to see. Sort of like accounting where everyone has access to the data.
That’s a (somewhat) simple way to say it.
So now you know that cryptocurrencies and blockchains are not the same.
Then vs. Now
At the start of the crypto world, mostly everything was a scam.
People would hope for you to deposit money and then the rug gets pulled from beneath you (they steal your money). As time went on, there was less of it, but it’s still quite common.
You may have also seen the major FTX scandal.
Essentially, one of the largest cryptocurrency exchanges didn’t have the money it said it had. And to make it worse, it was the money of the people who willingly deposited and transacted on the exchange.
This sent most of the market into a drop, although it was seemingly already headed there. Some cryptocurrencies like Bitcoin are deflationary assets, which means they’re supposed to do well during inflationary periods like recent times.
Well, it still didn’t increase in value.
Many of these crypto projects have hundreds of people working behind them with hundreds of millions of dollars from investors who believe in the project. Still, that doesn’t guarantee gains.
As with anything, it is smart to “do your homework,” but when it comes to crypto, that gets difficult. Since the space is so new, there isn’t a ton of accredited content and people like to claim mastery of the topic when they might not know so much after all.
With other asset classes like the stock market having so much information in the backlogs, it seems to be a safer bet. Still, there are some very interesting projects within the crypto space that could make a major impact on the world.
For the newbie investor, it might be best to stay away. Even for the advanced, it could trend toward the “don’t touch” column, but it’s up to you to make that decision.
At the end of the day, it’s all about due diligence.
No one knows what will happen with crypto, just like no one knows what will happen in the stock market, real estate market, or any other market!