One example is the runup of Bitcoin from $10,000 to $60,000 in recent times. A lot of people did really well if they realised their gains and they may make even more money. However, much of this runup seems to have been achieved through market manipulation. Here is an article that explains in quite technical detail that much of the runup in Bitcoin has been achieved through fraudulent misrepresentation of another cryptocurrency called Tether. I find it quite unbelievable that this article has not gone mainstream, its facts can easily be verified. The people who control Tether even had the New York regulator fine them but that still hasn’t been enough to touch this bubble, even though this fine was widely reported in the media. But to give a perspective here – Tether has probably earned its creators more than a billion dollars. In that context, the $18.5 million dollar fine is a speeding ticket.

There are now more and more cryptocurrencies, from the earnest to the wild, from the serious to the out and out but very successful joke.

If you choose to invest in cryptocurrencies and you choose to invest more than you can lose without worrying about the loss, the question may be why you would want to do that? You are buying something without an intrinsic value and whose price purely depends on what other people will pay. We can make similar arguments about gold (trading far above its intrinsic value as an industrial metal), or art, though these are much more established markets and have a long history.

Cryptocurrencies are based on what are called blockchains. That means, that transactions are authorised through a complicated process with no single authority in charge plus the possibility of being able to make anonymous transactions. Block chains were widely promoted as a great way to have worldwide payment systems or many other applications, but it has turned out that a so-called distributed database can do most of these functions much better and much more cheaply than using block chains. I find it interesting that, just when this understanding became more common among potential users of blockchains and therefore blockchains going a bit out of fashion, cryptocurrencies are taking off in a big way.

The bigger cryptocurrencies get, the more people there will be who can credibly say they have done well or very well (though many will not sell before a crash, if there is a crash in the future) and the stronger the impulse will be not to miss out. Personally I don’t invest in them as I consider them expensive, regardless of their price. It means I miss out on a lot of profits and losses but it also means I am not on a continuous roller coaster of emotions.

I trust this newsletter will shed some light on cryptocurrencies and as always feel free to contact me with any questions.
 
Warm Regards
Christoph