Some of us have probably come across some article about how a certain celebrity made thousands of dollars investing on cryptocurrencies. Well, this article will not teach you how to do it, instead it will show you how to think critically about it and question it.
Cryptocurrency is “a digital asset that is constructed to function as a medium of exchange, premised on the technology of cryptography, to secure the transactional flow, as well as to control the creation of additional units of the currency.” (Chohan, 2017). It works as any other currency like we know, namely the Euro, the US Dollar, and so on, because it has monetary value, since it is a medium of exchange. And like other currencies, people can invest on it and purchase it.
However, the way people see the cryptocurrency market may not be the same as the way they portray the “regular” currency market, because despite being similar, the control over them works very differently. This keeps going when celebrities and influencers promote or endorse these cryptocurrencies, since they can actually change people’s minds and influence them to invest on a certain cryptocurrency, especially when they may be paid to do so. Consequently, this could lead to some phenomena like inflation which might be hard for some people to understand how it works and how we can take advantage out of it.
Also, people who have a lot of capital can actually influence a lot the price of a given cryptocurrency and there are a lot of techniques that they use to win a lot of money. (Quinlivan, 2018)
At the end, we must be well informed about what we want to act on, so that we don’t incur any risks due to our lack of knowledge.
Chohan, U. (2017, August 25). Cryptocurrencies: A Brief Thematic Review. From SSRN website: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3024330
Quinlivan, B. (2018, July 19). The Mysterious Manipulation of Crypto Markets and How to Manage. From Hackernoon website: https://hackernoon.com/the-mysterious-manipulation-of-crypto-markets-and-how-to-manage-5234e19e6e77?gi=464f5b731542