Is Crytpo still the future?
Is Crytpo still the future?
Dec 7, 2022
Written by Katie Gomez
Each generation brings fresh perspectives, ideas, and innovations carving new paths to the future. Cryptocurrency became popularized as the “new thing” as it broke out in 2017. Although it had been growing since 2009, most of the public had no idea what it was until “important people” started talking about investing in it. Today, cryptocurrencies, like Bitcoin, are open to the public through more brokerages and are even established as legal tender by some countries. Social media (Instagram, Reddit, Tiktok, Twitter) also fueled its rise in popularity, especially among the younger generations (Millennials & GenZ). However, the implosion of FTX due to fraud and poor bookkeeping has shaken people’s belief in crypto. The fall of FTX has everyone asking the same question:
Is cryptocurrency a safe investment going forward?
Although it seemed we were moving toward accepting crypto as a legal tender, the fall of FTX has halted that momentum. People put their trust and money in an idea, not something tangible like gold or silver. FTX was a wake up call for investors, especially younger traders who had advocated for crypto’s future. FTX was a widely-known and heavily-used cryptocurrency exchange. It allowed users to buy or sell coins and tokens through derivative contracts. An example of these tokens is NFT, which happens to have its transactions promoted by FTX. Millennials saw cryptocurrencies as the way of the future, thinking it was a solid investment; the new gold and silver. However, cryptocurrency will never be a substantial investment like gold and silver because it does not tangibly exist.
Unlike gold and silver, cryptocurrency has always been risky because it is not something you can hold and know its value. Cryptocurrency is a digital currency that regulates transactions using a decentralized system (a blockchain ledger) rather than a centralized authority. Although autonomy from the government was the original appeal of crypto, one could now argue that to be its downfall as the collapse of FTX exemplifies. Investors could appreciate this utopian idea that our future could be one where the government’s power over money has ceased to exist. Still, after seeing the fate of FTX, there is a reason for this government regulation (Milmo, 2022).
Will other cryptocurrencies suffer the same fate?
The chaos caused by FTX has spread to other cryptocurrencies. Since the collapse of FTX went public, there have already been signs of spillover. “BlockFi, a crypto lender rescued by FTX in the summer, has paused customer withdrawals, admitting that it has significant exposure to FTX” (Milmo, 2022). Although FTX is only one cryptocurrency exchange, the trust people once had in the crypto market is diminishing.
Popularity vs. Usefulness?
Almost everyone has at least heard the term cryptocurrency by now. In 2009, the term was familiar to the few traders mining it, but crypto didn’t gain its current notoriety until about five years ago. Cryptocurrency became more than just a buzzword; it was the new thing everyone wanted a part of, especially the younger generation. However, the more time goes on, the more investors are left wondering, what is the value of having it?
Millennials, a prominent number of crypto advocates, answer that digital currency is the way of the future; money, gold, and silver will become obsolete. Millennials are more likely to hop on the bandwagon if they see someone else find success first, especially if those people are celebrities. Therefore, after seeing the Winklevoss twins form their Gemini Crypto Exchange and Shark Tank Mogul Mr. Wonderful share his sizable investments on Twitter, they feel safer to invest and encourage others to follow suit.
There is no doubt that digital currency is a popular topic of conversation, but owning or investing in it is another story. Crypto is a giant question mark that people have difficulty explaining. How is crypto a wise investment? How can owning crypto help me make money? Is crypto worth investing in? These are all questions that both potential and current investors are left asking.
Overall, cryptocurrency investors argue that digital currency is the future of finance. However, this argument has become more of a bandwagon statement than a claim of logic and reason. Although digital currency might well be in our future, there is no telling when that will happen, and investing in it now may have no value. Given its reluctance for government regulation, its popularity stems from the herd mentality rather than logic or reason; when something is “trending,” we fear being the last person to own it.
The innate human feeling of being excluded from the herd has distracted investors like Millennials into researching whether their savings will be most beneficial in digital currency instead of more secure assets, such as gold and silver. Millennials know this term as FOMO or fear of missing out. At the peak of crypto talk on social media, Millennials felt the FOMO of being left out of the opportunity, and the pressure to follow the herd.
However, just because the last few years have seen Millenials and moguls staking its validity, crypto has yet to be considered a safe bet. The recent collapse of FTX just confirmed people’s suspicions of crypto since it went public. In 2022, the number of Americans who claimed they were either somewhat or very comfortable with cryptocurrencies plummeted almost 40% from 2020. Surprisingly, Millennials, the former leading crypto advocates, have dropped nearly 42%. Down 50% from last year, only 30% of millennials surveyed felt comfortable investing in crypto. (Beers, 2022).
Therefore, I think it’s safe to say the allure of digital currency is slowly decaying, at least for the time being. The market can change in the blink of an eye, and risky bets for the future, rarely pan out the way people assume, at least not in the time frame expected.
DeVon, C. (2022, September 29). Only about 30% of millennials are comfortable investing in crypto, down from about 50% in 2021: ‘the shine has come off these coins’. CNBC. Retrieved November 30, 2022, from https://www.cnbc.com/2022/09/29/millennial-investors-are-getting-less-comfortable-with-cryptocurrency.html
Hern, A., & Milmo, D. (2022, November 18). What do we know so far about collapse of crypto exchange FTX? The Guardian. Retrieved November 30, 2022, from https://www.theguardian.com/technology/2022/nov/18/how-did-crypto-firm-ftx-collapse#:~:text=In%20the%20medium%20term%2C%20it,FTX%20would%20credit%20their%20accounts.