"Srikanth
Sir, why did you never suggest us putting money on Crypto?"
This is a
standard question I get from many of my YOUNG clients
My standard
response is "Anything which is attracting your attention only because
of its PRICE movement and not because of its UTILITY and Usefulness does not
deserve your hard-earned money. If you still want to go ahead...invest only
that money which you are ready to lose 100% "
THE
BIRTH OF CRYPTO :
𝐎𝐫𝐢𝐠𝐢𝐧𝐬: Crypto (rather Bitcoin) was born in
chaos, in the aftermath of the 2008 financial crisis – banks collapsing, counterparties abetting on contracts, and declining trust in Central banks. It was designed
as a peer-to-peer decentralized monetary system devoid of intermediaries.
And
gradually it grew worldwide mainly because Govt could never find who owned
Crypto coins and this made people with ulterior motives (Terrorists, Drug
Traffickers, Crime Syndicates, and Black Marketers) adapt Crypto and
promote them
The anonymity of
the Holder is the biggest attraction of CryptoCurrency.
WHAT
IS MONEY :
Money has 3
purposes. It serves as:
A medium of
exchange
A store of
value
A unit of
account
While CryptoCurrency is definitely a unit of Account
whether it’s
a medium of Exchange or a Store of Value is a question mark
It’s not yet
a medium of Exchange because Govts all over the World do not want to let go of
their hold to print money and are hostile to the CryptoCurrency.
(For
example, RBI would not let its hold to let of printing Rupee)
It’s not a
Store of Value because it’s very volatile
Going up
1000% in a month
and
equally
crashing by 99.99% within 10 minutes !!!
And to
create Crypto, technology is used, and this uses loads and loads of energy.
In fact,
BITCOIN CONSUMES MORE ELECTRICITY THAN ARGENTINA.
SHOULD
I INVEST IN CRYPTOCURRENCY:
Any
investment for that matter should always be done on 3 parameters
1. Risk
2. Return
3. Liquidity
RISK :
What is
attracting loads of people to Crypto is purely the Price Movement and Risk is definitely the least item on their
mind.
In fact, RBI
Governor and even Indian Prime Minister too have warned about Crypto Currency
and advised people at large to be careful about putting money in CryptoCurrency.
You would
have read many news items of CryptoCurrencies being lost due to THEFT from the
Digital wallet, Computer Failure, even loss of passwords.
Yes...if you
forget your password of Bitcoin then that money is GONE FOREVER as getting a password is next to impossible.
I am
reminded of the incident of one Mr.Stefan Thomas
Thomas lost
over 200 million dollars because he has forgotten the password to his secure
hard drive that allows only 10 attempts.
RETURN
:
You get a return on any asset when the underlying either produces something of value or
grows in value due to its utility.
Sadly,
CryptoCurrency is just a digital token.
Shares have
underlying companies which make products and services and generate profits.
Bonds have
borrowers and lenders
Gold has
intrinsic value
Metals have
usages.
CryptoCurrency has NO UNDERLYING ASSET and get this basic fact CLEAR in your mind.
The price is
going up...well...because of Demand (feeling of limited supply).
Once this
false notion goes...the pain could be unimaginable.
LIQUIDITY
:
Constraints
on liquidity
Lack of
legal tender status will constrain cryptocurrency liquidity compared to
traditional portfolio hedges such as Commodities (Gold), Currency, Bonds, or
real estate.
Any asset that
can generate cash for you is said to have liquidity.
Some like
Bonds, Gold, Stocks give instant liquidity
Some like
Land, Art gives you delayed liquidity.
And I always
give liquidity priority on how quickly I can get money when there is emergency
or a crash.
In this
case, even though land appears illiquid, still you do get cash even if it is some
discount to its perceived value (if you sell in a hurry)
Sadly,
Crypto Currency right now faces the issue of finding a GREATER FOOL to pass on
the egg to.
This is due
to variety of reasons like regulation, limited reach and shallow understanding
of Crypto Currency.
UNREGULATED
:
Crypto Ads
are here, there, and everywhere
The ads
clearly show that Investing in Crypto is UNREGULATED.
What this
means is, in case if something goes wrong with your buy or sell trade, no
one....I repeat, no one be it SEBI, RBI will take your complaint and help you
get back your investment, as Crypto is
Unregulated.
Is Crypto
Currency regulated?? ....NO!!!
You want to
invest in something where there is no one to go to in case of a fraud?? NO...right.
Then stay away
Moreover
there are 6000 odd varieties of crypto Currency and 1 getting launched
virtually every day.
and even as former
RBI Governor Raghuram Rajan said..."only an handful will
survive" which means more than 5990 Crypto Currency could become ZERO
and who knows the Crypto Currency could well be the one which could go down all
the way to Zero.
Crypto
Currency is as unregulated as your next-door CHIT FUND which take money from
people and vanishes. There have been too many scams involving Crypto Trades.
Yes....scams
are there even in stock markets. but at least we have SEBI, RBI, Finance
Ministry who get involved and help the investors.
But where
will the Crypto investors go?
Whose door
they will knock if there is a scam?
China has
already banned all forms of Crypto Currency in September 2021
More and
more Governments will probably go on to make Crypto Currencies illegal or very
expensive to deal with in practice.
CANT
PASS IT ON:
Like your
land, mutual fund, FD or any other investment, Crypto Currency CANNOT be passed
on to your dear chosen nominee after your death, except by handint it over
yourself, which you cannot do if you are dead. This is because Crypto Currency
has a Cash-like-feature.
ACCEPTANCE
:
BITCOIN NOT
YET ACCEPTED
Someone said
Bitcoin is now accepted at many places!
Seriously?
after 10
years of launch, out of 6,20,907 restaurants in USA, only 6,20,822 DO NOT
ACCEPT Bitcoin, and you call this Acceptance !!
Just ask
your servant whether he wants payment in Rupees or Gold or Bitcoin.
IN
CONCLUSION :
Just because
more and more Retail investors are putting money in Bitcoin does not mean it’s
should be made legal.
In fact,
right now there are more Crypto Traders (10 crores) than Mutual Fund investors
(6 crores)
Does that
mean Crypto is good?
For them, I
have a question
Just
because you find more WINE SHOPs than YOGA CENTRES does that mean WINE SHOPs
are more beneficial than Yoga Centers.
If you do
want to put some money as every Tom, Dick and Harry is putting money in
Crypto...then PUT ONLY THAT MONEY WHICH YOU ARE READY TO SEE IT BECOMING ZERO.
Do not put your parents Hard Earned Money into this Tamasha.
Having said
this....Cryptocurrency could become legal going forward and could come under
regulation but till then I follow the principle of A BIRD IN HAND IS WORTH MORE
THAN 2 IN THE BUSH!!
For me,
BITCOIN is a game of GREATER FOOLS THEORY.
Someone
buying only in the hope that there will be another person who will PAY MORE for
it and this cycle as long as its running the dance goes on. Its just trying to
find the next big fool.
The day
fools end, the bubble bursts.
The moment
the music stops we may well see LOTS OF BLOOD on the street.
Yes...some
people have made money in Crypto Currency
People have
made money even in Casinos
People have
made money even in Races
That does
not make Casinos and Races a place to INVEST.
They are
good for Gambling. The same goes for Crypto Currency.
Crypto
Currency is good for GAMBLING and not for Investment.
I rest my
case.
Regards,
Srikanth
Matrubai
Author -
Dont Retire Rich
All the best,
Regards,
Srikanth Matrubai
https://t.me/joinchat/AAAAAELl4KUnaJzi-JJlDg/
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