Crypto: a new store of value or another form of investment?

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2 weeks ago

Before I start, I want to make clear that English is not my spoken language, so if there are mistakes, sorry in advance (every charts take the same arc time).

When the first crypto currency was thought, the main reason was for a peer-to-peer of electronic cash for online payments without going through a financial institution. Stop.

From the first transactions, made also for buy different things and simple pizzas, things changes, showing us that the first crypto currency fail, in part, as a digital currency, not because isn't strong enough to compete the centralized payments method, but because isn't fast enough for global economy and e-commerce.

To solve this problem, many companies and developers, come up with new blockchains and new crypto currencys more performing than the first crypto currency, instead of put effort in the first blockchain to speed up things and good things.

Results?

We have different crypto currencys but not all for the same first purpose, because can made incredible things thanks to smart contracts, EOS blockchain purpose is to make a decentralized world and it can be used also as a payment, and other blockchains are more useful and used for payments, like Bitcoin Cash (BCH) witch in the future can also made great things and more sophisticated smart contracts.

A separate mention need for stablecoins, where, in my personal opinion, the best are witch we can generate in a completely decentralized way, so we do not rely behind a physical assets that we cannot control or verify.

So, what is the reason and purpose now, for the first crypto currency?

At this point the debate becomes difficult and with different opinions, where one side say that is always a payment method, that is true until a certain conditions, and others say that it became a store of value.

Prior to continue, we have to understand, clear, what is store of value and what it means:

"A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. More generally, a store of value is anything that retains purchasing power into the future".

So a store of value must be anything that has a value, and it can maintain his value (different by assets) independently from what happens in the World, and where in the future can be used or sold for goods and service.

Typical examples of store of value are diamond and gold, the last often compared to the first crypto currency, where they prices changes, during times, by different variables, one of them is the inflation, and even in the worst scenario it cannot reach 0 for they useful properties:

gold charts (pretty much the same range of value) from https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

With this concept we cannot define the first crypto currency a store of value, because for his nature is a deflationary asset, limited with a known supply with an algorithm that produce a bunch of it in a known time so we can know before how it can evolve.

So the value of the first crypto currency, rely much on his nature, and is very difficult understand the other variables linked to his value in a short, medium and long time, where many believe that the halving can push the value up and rich new high that we can't even imagine, and many buy the first crypto currency merely to gain a profit by selling it at a thoughtful price, I hope.

This view bring us in memory something that moves on the same patters, buy something at low and resell when the price is high to make a profit, where it can be for example NFT (Non Fungible Things) and of course stocks, that are investments:

"To invest is to allocate money in the expectation of some benefit in the future. Investors generally expect higher returns from riskier their investments. When a low risk investment is made, the return is also generally low. Similarly, high risk comes with high returns".

Let's take an example with one of the famous company that operate in the World and well known, Amazon, and take a picture, of his stocks from some years ago:

Amazon stock chart (10x in 7 years, with some little drop) from https://finance.yahoo.com/chart/AMZN/

To support this thesis and the fact the first crypto currency is not a proper store of value, but more an investment, let's see the price of his in the last years:

Bitcoin (BTC) chart (from $800 to $20000 is 20x, from $800 to $600 is 7,5 x) from https://coinmarketcap.com/currencies/bitcoin/

As we can see from the graphs, the pattern is extremely similar, we have to take into account also other factors, but is clear that the first crypto behave like a stock and not like a store of value.

Same pattern we can find in every crypto currencys, more with tokens because some of them as been treated like stock trough ICO (Initial Coin Offering) to gain funds for their projects, where most of them build a true Ponzi scheme.

This means that every crypto currency can make a "??x" in the future?

No, this means that every crypto currency must be treated like an investment, and has it's risk, more risky are tokens (so not crypto currencys) linked to blockchain projects.

In conclusion the best advices I can give You are:

- Do Your own research about a crypto currencys and blockchain projects;

- Invest only what You can lose;

- Don't Trust, Verify!

Tried to stay ad objective as possible, someone can blame on me for the crypto currency I mentioned but who cares, I did my own research and I always open to different one, hope it was useful for some of You, and have another view on this matter.

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Avatar for AlanOne
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2 weeks ago
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