I have been on the lower end of the income ladder for many years. Not as low, as $1 a day, as some folks in a number of countries. But at my first full-time job, pay was what would now be about 350 Euro a month, for 210+ hours worked – and that is quite low even compared to the current federal minimum wage in the United States, at $7.25 per hour.
Later, I was able to save up some hundreds of Euro, and I wondered where I would put it, so that it at least wouldn’t depreciate due to inflation over the years, and be of some use in retirement, as pillow for expenses such as a new fridge. And evaluating the options, I didn’t put even a single Euro in crypto.
Technically, it sure is possible to make a profit from trading crypto. But in my view, the main problem is, that the value of this or that crypto, it depends way too much on money flowing in by these trades.
In contrast, a company with public stock, such may be paying yearly dividends worth 5% of the value of the stock, based on the revenue it had with its business. So, even if the company doesn’t have skyrocketing growth over the next 10 to 20 years, the stock ends up paying for itself, even if it isn’t traded daily in large volumes. Whereas with crypto, there is no such revenue, nor are there assets (such as a factory of a company).
So, an investment in crypto, it is pretty much just a bet on that others will keep purchasing crypto as well. A bet which did turn out plentiful for some, but in my view, it doesn’t mathematically add up for everyone.
In example, let’s say I make my own crypto, the DaLe-Coin. It’s the newest hottest craziest thing ever, and all that. And I am offering one coin for merely $1,000, with only 1,000 coins in existence.
And now, someone may be like: “I take two.” – and price/value on the market goes up. So far, cool. I can already pay rent, and the purchaser of the two coins, they may be already doing free marketing for me, as they are now invested in this crypto with $2,000.
Next round, even more people start buying DaLe-Coin. Price goes up even further. And I am like over the moon, already dreaming about making it onto the property ladder, like a small place of my own. And the first purchasers are also glad. But, a new purchaser may now look at a price of like $10,000 a coin.
This is in itself not necessarily a problem. As I sell some of the last coins I hold, the first purchaser may perhaps also start selling the two coins they hold, and so on, still making it possible for the $10,000 “value” to increase, when there are still people buying. And even someone coming in at $10,000 may perhaps look at $20,000 after some time. But to achieve that, it still needs that viral momentum, for people to want to get this DaLe-Coin.
And without this momentum, the guy who went in at $10,000, they need to create that momentum, basically like the free marketing again, if they don’t want to lose out on possibly thousands of dollars. And so on and so on. And to me, that doesn’t seem much of a fair trade, because I would be leaving that guy with all the risk about DaLe-Coin, whereas with a DaLe-company stock, it would still be of mutual interest for the stock to perform well, largely due to the business running well.
And that’s why I am rather skeptical about putting money into crypto. Which isn’t to say, that there won’t be further growth to the crypto market. In particular, if some popular video game starts using (own) crypto as a sort of game currency (perhaps as reaction to legislation, saying that paid for in-game currency must be able to be changed back to cash), then that would likely be a large number of players, who would start buying crypto, to purchase in-game horse armor with, and whatnot. But that all sounds too speculative for my taste, in regard to putting some money aside for rainy days.