Are the base of cryptocurrency delight!
The prefix “crypto” means hidden or secret. In the case of cryptocurrency, it also means “illusory.”
Gold has been a store of value and thus a form of currency for millennia, one originally based on its cost of extraction and purification.
Other than that, monetary values have been based in recent decades on what a dollar can buy, an ever-changing (but generally declining) assessment built on international financial systems and based in large part on the domestic economy.
It is not entirely clear what a cryptocurrency adds to human existence. As long as government stands behind the dollar in its usual fashion, and the dollar remains the gold standard (pun intended) for global finance, Bitcoin and the like are poseurs, mere pretenders to the throne of value.
If a run on the dollar occurred that the government did not address appropriately, then other forms of money and/or exchange such as gold would have to fill the gap.
Who guarantees cryptocurrency? Not a soul. Nor is it subject to government surveillance of money movements. And there is no mechanism to “reverse” an illegitimate transaction – the tales of Bitcoin holders losing millions to theft are legion. Even forgetting the password to your Bitcoin account is a fatal error – the currency offers no way to retrieve or reset one.
How, then, does such an ethereal concept – a self-minted currency accepted almost nowhere – climb to nearly $50,000 in value for each digital “coin” it produces?
Easy: by riding the same forces that propelled GameStop to ridiculous heights – fractional ownership of shares that opens the market to hordes of uneducated (financially-speaking) buyers eager to catch a wave; a feeding frenzy of greed likely egged on by “pump and dump” speculators able to get in early, and glamorized by endless, breathless and credulous coverage in the media.
Cryptocurrency in effect is creating something out of nothing, based on nothing more than the willingness of people to buy into the fantasy
That is a great achievement –if you can believe it—for as long as the participants believe it.
It seems obvious that something like that cannot go on forever.
We have yet to see how, exactly, it unwinds, but one suspects it will not be pretty.
We may know soon. The answer is cryptocurrency has zero underlying value. Even Tesla is better, despite its insane values, because at least some people have bought their cars.
The world we live in governs our lives.
Heaven and hell forbid.