The Great Paradox of Cryptocurrency

Cryptocurrency is not a new term. We have been hearing from NFT about this investment model since 2009. The idea of cryptocurrency is to enable easy peer-to-peer transactions. There is no involvement of any central bank or regulatory agencies. Unlike traditional banking systems where it may take more than 2 working days, crypto is different.

Cryptos are not pegged to any currency value. It means a person in India can transfer his/her bitcoin to someone in the US through a click. Yes, that’s all it takes. But wait, is it secure, is it safe?

Ever since cryptos came into the market, there has also been debate about their utility. Many industry experts have claimed that this investment model could hamper the economy. These investments could cause an economic slowdown. Despite all this growing negativity, the token continues to attract investments.

As we write, the cryptocurrency volume is growing. Today, cryptos have a market volume of more than $3 trillion. There are more than 4k+ cryptos currently available in the investment market.

Other than cryptocurrency, there is an entire industry lined up to take advantage. Along with cryptos, its allied services such as exchanges, data mining, ATMs, etc.

Decentralized exchanges, tax calculation software, and payment gateways continue to grow.

Is crypto failing?

This is an interesting question. The investment in cryptos continues to grow. But going by individual crypto analytics, the value is failing. Looking at Bitcoin alone, the value has dropped by more than 75% in the past years. This is an indicative sign of cryptos failing in the market. From the outside, the market seems to be doing great. But that’s not the inside story. Cryptos are failing and let us understand the reasons for it.

Crypto is not a revenue product

Unlike stock, shares, or bonds that allow you to determine earnings. Cryptos do not allow this possibility to investors. There is no maturity on any transactions. It becomes impossible to decide on returns on principal. Crypto does not have any earnings and it becomes difficult to decide on the profit or loss ratio.

Cryptocurrency is not linked to demand and supply

Crypto is not a commodity or product. There is no demand in the market contributing to the supply of the same. More than 80% of crypto tokens come with a limited supply pool. Once the supply is completed the data mining stops. The ambiguity between supply and demand tends to control the prices. The investment model does not guarantee long-term returns.

Cryptos are not a store of value

Certain experts have always been claiming that cryptos are a store of tokens. But this is not true. The crypto market is highly volatile. And the market is open 24*7 as well. There are changes in prices every hour. Which makes it difficult to get the principal back if cryptos fail.

It is not a currency

Cryptos have still not got legal status. And industrial experts are not even pushing for a regulation on them. Unlike traditional currencies that can be used to buy goods and services. Cryptos are still not made available for such use. Yes, certain online platforms do agree to use crypto payments. But going by analytics, this contributes only to 1% of the overall market. Hence, this is not a long-term sustainable solution.

Crypto is an unprotected currency

Yes, you heard it right. The decentralized finance model is good to an extent. But with more and more countries trying to regulate this investment. It is a wait-and-watch situation to see how these investments will work. Many countries have already come up with steering committees. The team is working to understand this investment and its contribution to societal development.

The crypto market is volatile and speculative

Yes, the market operates 24*7. That means your investment can either grow or lose while you are sleeping. This is the greater paradox of cryptos. Many consider this as an advantage. But the fact is that crypto has its impact on market conditions. A tweet can increase the price of cryptos. A wrong message anywhere in the world can surge the prices as well.

It is important to understand this investment model end-to-end before making any investment. The picture may look rosy from the outside but the reality is way different.