This is a serious post, and not meant as being derogatory at all.
I have little or no financial nous, I admit.
Can someone tell me the difference between cryptocurrencies, and the sportscard fad of the 80's, apart from the scale it is being played on?
Safe investments are meant to be done in something that actually produces something. I'm not talking about producing profits from the investment, but the "company" itself produces something. Invest in BHP, they produce steel, diamonds etc. Invest in a bank, and they produce a money lending service, and financial services.
Invest in a cryptocurrency, and they produce ........ ?
Like investing in sportscards in the 80's, the wealth is artificially generated by a supposed demand, and the demand is produced by a frenzy of people seeing others "doing well", and wanting to get in on it. But it is just a big balloon, and the more air pumped into, the more likely it will burst, and the more likely we will see other people making bigger and better balloons (supposedly). The number of cryptocurrencies now numbers in the 100's, and is heading towards the 1000's (I could be wrong, I haven't checked). But just like all those pyramid schemes and chain letters that aslo created nothing, but still some people got rich from them, these cryptocurrencies seem to be at the mercy of the founders, who really actually have control over if the price will crash or not.
The founders hold the biggest stakes, and can decide to start selling at high points, to cash in which is their right, but how are mom & pop investors protected against this? The bottom line is, they are not. You can point to "the rules" and say they prevented from doing it in their constitution/by laws whatever, but only a fool would not acknowledge there are no ways around this.
So in 1981 Upper Deck produced a Magic Johnson Rookie card (this is just conjecture), it sells for $1 on release, and is limited to a print of 10,000 cards.
Upper Deck release 8,000 cards into general circulation.
The boom on sportscards hit's in the late 80's and early 90's and people are selling their Magic Johnson Rookie cards for $200-$300.
Others see the profit being made, and want to ride the wave.
They buy the card, ride the frenzy, and sell it a few weeks later for $500.
The frenzy continues, and months later the card is selling for as much $800-$1,000.
That card now sells for $20-$25.
So what went wong?
Other sportscard producers quickly entered the market, wanting to cash in on the "boom". This watered down the market, as there is a finite pool of collecters/investers, and a finite number of cards that can generate that much interest.
At that same time, Upper Deck see others trying to cash in on their little dominance, and decide they need to maximise their return. They are sitting on 2,000 pristine Magic Johnson Rookie cards, that currently have a street value of $1.5-$2 million. They start selling them through "back door sources", because they don't want to spook the market. This still causes the price to drop a bit, as the supply starts to catch up to the demand. They end up selling 1,500 of their 2,000 card stock, and achieve an average price of $500. They have effectively created a price drop of 50%, that will now cause the street investors to panic, and sell before they lose their investment. This drives the price down further, until it eventually falls to $80-$100. Today, 25 years later, that price is $25 (this part is true, and researched).
The sportscards companies actually did produce something. The card itself.
Cryptocurrencies produce nothing. It all appears to be air, and there are more and more balloons being made, and popping up, and there is still a finite number of money and investers to go around.
You can't go to Bitcoin, and borrow money to buy a house.
So what are they producing, except a concept that there is currently a demand for, that like the sportscards, is being copied and replicated, and really at the mercy of the biggest stake holders, it's creators.
As I first said, this is a genuine question.
Apart from scaling on a whole different level, what is the difference between cryptocurrencies, and sportscards?