This is a hype post for people who are quite into very new ways to make money and become rich with crypto or similar digital things. While some examples here are clearly a way to make money, it is not neccesarily understood as an “investment” or even a simple “bet”. I will explain some details.
NFT
Let’s begin with the least favorable thing. What is an NFT?
An NFT is, according to wiki is
A non-fungible token (NFT) is a unique digital identifier that is recorded on a blockchain and is used to certify ownership and authenticity. It cannot be copied, substituted, or subdivided.
https://www.merriam-webster.com/dictionary/NFT
Mostly digital pictures are recorded in this format. Well, i disagree with the non-copy-format and that is what I recommend you to understand. There is a risk here, that the technology can be manipulated and therefore it is not favorable to spend any money on it. I categorize NFT in the art sector, which has a questionable form of value creation anyway. So not only it has only value to some people with too much money and cannot be sold on easily, the even worse part is that it can be manipulated and copied, because pictures are not displayed in a machine code format. Who cares if the color shape of a picture in a computer is 0,0001% different, who can even see that? And what is a picture displayed in a computer worth anyway?
Yes. Nobody. Mostly worth nothing. Therefore most NFTs have absolutely no value.
I recommend not to spend money on it if you want to make a profit in the future. Doubly so, if you want to make investments and create value for the society.
Bitcoin, DOGE Coin, dumbster coin, etherium stupidongo bongo
Well, as you can already read in the headline, I find the development of these so called “currencies” quite unfavorable for the general society. The “crypto bros” as being inventors of this stuff might have a different opinion. But one should consider, that these people took a shitload of money from normal people by using some digital hokus pokus. Another problem I see with this sort of “money” is that is is not money. As you can read here (Where does money come from?) money is created by debt. All money on earth. And this digital form of currency is not created by debt. That means it doesn’t work like money, so it is not money. Then what is it?
Some more questions arised in my head:
- If crypto money is not created by debt, how will value be created out of it?
- If there is new stuff like crypto, but no value is created out of it, will the value of current goods be higher than before?
- Does that mean real money is worth less, too, because everything currently availble is getting more expensive faster, because useless cryptocoin is bought with money that is actually debt from the bank?
- And finally, does that mean inflation is created by “investing” into crypto stuff?
Well, well, who would have thought about that?!
I see crypto rather as an asset class like gold/silver or other commodity investments with the difference that there is actually no physical material backing it, it is only digital in a computer readable format. Further, is has no additional use, because payment options on the internet exist. There is this argument that it is anonymous and fast. Well if you prefer anonymity for anything you buy, you can use anonymous cashcards, which you can buy in any supermarket. And if it is for payment of illegal goods, you might rather think about your habits, health and why illegal goods are illegal, than about investing in zeros and ones. The argument being fast has been revealed. It can take ages to really transfer a digital coin, because of the limited capacity of calculation in the global blockchain. Mostly, what is transferred when you interact with with crypto exchanges is really nothing. More parties pay real money into the “exchange” than parties which actually cash out. The exchange then cashes out the real dollar money to itself. Of course, when you can only see your computer screen, you cannot look into how these exchanges work. But I guarantee it is the basic concept why they are run. That is fraud, which has been proven a lot by sending people who run these exhanges into prison.
What I wrote here is not particularly dooming the technology around bitcoin and cryptocurrency to hell. Creating a currency with a dog on it makes me happy. And I think it can be a good idea to convert money digitally. But that just means making debt more digital, which this tech doesn’t provide. Debt is normally written down in a bank. It could be written down just elsewhere in a digital format.
Recommendation
So, should you invest in this “asset” class?
Well, an investment is only an investment if it creates value. That is not the case here.
So, should you make a bet in this “asset” class?
With a bet I would refer to Risk & Chances and Bets & Outcomes topics. With all those risks that I have described above you must have an incredible return opportunity. The best way to have a high return here is, when set up your own crypto currency and throw it on the Markets. If you did not set up the crypto currency by yourself, you have no clue how it works, and then i cannot recommend to bet anything on it. You will likely run into the high risks and lose.