Crypto Mania is not going anywhere, and it’s due to a series of economic, technological and even psychological factors. So, what exactly is it? We’ve all been experiencing Crypto Mania in the past year: Digital currency went mainstream: Retail investors and big companies alike joined the hype. All of the payment apps created crypto features. And the amount of shitcoins (digital coins with little to no value) out there is steadily growing. So, is crypto a good investment or a passing phase? Ryan Adams, Co-Founder of HZQ Consulting, explains what makes speculation surrounding the crypto market different from other types of assets and why you may want to steer clear.
How psychology comes into play
The intense energy surrounding the trading of cryptocurrency is, in part, due to the large amount of financial insecurity that exists around the country. People throw tons of money into crypto because they’re desperate; when they hear about the dramatic returns (due to its volatility), they seize the opportunity.
Pump and dumps
This desperation leads to the creation of pump and dump scams, where social media influencers create a cryptocurrency (which anyone can do), promote it on their socials to inflate the value artificially, and cash out when they’ve made a sufficient profit. All the while, the people who hopped on the trend later lose money when the valueless coin eventually crashes.
Volatility is a big factor in Crypto Mania. The fact that digital coins are a fairly new type of asset means crypto is significantly more volatile than stock and fluctuates much more with the day’s news. For example, a story about a country imposing new legislation on crypto can cause prices to drop dramatically in days.
Invest in the long-term
Is crypto a good investment? A tried and true strategy has always been to invest in the long term. In the case of cryptocurrency, this could mean investing in applications of blockchain technology instead of shitcoins. Cryptocurrency likely will replace credit cards as the next new financial medium, but there is no telling which coin will come to dominate that landscape in ten years.