Why I don’t invest in Cryptocurrency

I have been writing quite a lot about technical stuff so far. But, today, I’d like to share my thoughts on Cryptocurrency investment. The first cryptocurrency was Bitcoin, which was first released as open-source software in 2009, its market price is now over $68,000/coin. As of now, it is still the king of cryptocurrency, but there are more than 25,000 other cryptocurrencies in the marketplace. So, we can’t deny the growth of it, but I don’t consider it as an investment, more as a gamble instread.

1. Traditional banking transaction (centralized) and blockchain transaction (decentralized)

Let’s imagine a normal transaction would be like this. There’s a village, these 3 people live in that village along with other villagers: A, B and Bank. In a traditional banking transaction, when A transfers $10 to B, the Bank will keep a record of that $10. In case we need proof of this transaction, the bank can provide it. In a blockchain transaction, when A transfers $10 to B, everyone in the village has a record of that transaction.

As you can see, in a traditional transaction, the bank is the only party in charge of keeping information, in that case, if there is a security breach, any information about that transaction can be lost or altered. This weakness is why people believe blockchain transactions are the future.

Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. assets can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding).

Source: www.ibm.com

Cryptocurrency is created using blockchain technology. That’s why it has all the traces of a blockchain transaction.

2. Cryptocurrency in different stages

Since its first release, people’s expectation of Cryptocurrency has been shifted from one to another.

a) As a replacement for lawful currency

At first, it was expected to become so popular that it replaced government money in our daily use. However, this one failed because of transaction time, transaction fee, value stability, and acceptance.

• Transaction time: a global Visa network can execute more than 65,000 transactions per second (TPS) while the fastest crypto platform, Solana, execute ~2000 TPS (it is much more in 2024, roughly the same number as Visa, on paper).
• Transaction fee: are flexible in nature and can vary based on how busy the blockchain is. A user who wants to expedite a transaction can choose to do so by paying a higher transaction fee. It also depends on how big the transaction is. So, if used in daily life to buy bread or grocery, it would cost a lot more then when buying a house 
• Value stability: what does stability means? Imagine, yesterday you pay $10 for a bread, today you need to pay $30 for it, and tomorrow $15. With the drastic change of cryptocurrency price, there’s literally no tool to control it. Trading would be a mess.
• Acceptance: widely accepted is a requirement of a lawful currency that cryptocurrency doesn’t have.

b) As a store of value (gold)

One of the core requirements for a store of value is that it needs value stability because it will be used as an anchor for the value of a currency and other assets. And as said above, cryptocurrency can’t guarantee this, so there is no chance that it would be a store of value. That’s why people start to see it as an investment.

c) As an investment

Let’s take a look at Real Estates and Stocks.

These 2 are the main channels which people will put their money in, if they want to invest. What do these have in common? Real Estate is the visible property that you can see, even touch, it’s real as said in its name, and Stock represents a company.

For me, an investment can have risks, but it should be based on something so I can evaluate and make my decision to continue investing or move to another. For Real estate, the base is the economy, the surrounding neighbors and facilities. For stock, the base is the company it represents, their financial report. With traditional investments, there are policies and regulations to protect investors, to apply legal adjustment when there are frauds.

For cryptocurrency, there is no base, nor rules, a random tweet from Elon Musk would have dragged the price of bitcoin up or down, the collapse of a crypto trading platform would make you lose all your money overnight without any sign. It’s like someone takes a rock, sells you the rock at $1000 and you bought it because you expect to sell it to someone else at a higher price.

3. Final thoughts

I don’t even consider cryptocurrency as a currency. Currency is much more than just a means of exchanging commodities and services. It’s the key to operate not only the economy of a country but also the whole country (politics and society). This means it should be centralized, and this is against the nature of cryptocurrency.

Don’t get me wrong, I’m not trying to change your mind about investing in cryptocurrency, I’m just sharing my point of view. If casinos exist, why can’t cryptocurrency? I personally believe that blockchain technology is a great deal, and expect to see its applications in other aspects rather than currency.