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The cryptocurrency hype continues, but you have to ask yourself: Can the lure of fast money control your financial decisions?
The other day I received a sales flyer for some Bitcoin exchange packaged with my grocery order. This was news to me because, as far as I know, bitcoin advertising has not reached the level where brochures are being placed in groceries. The sales flyer featured an AI-generated illustration of a young man running to catch a bus in 2050, while he wistfully thought, “Kash, papa ne 2024 me Bitcoin liya hota.” The back of the booklet contained a graph of Bitcoin prices, along with the message: “Bitcoin prices have increased after every Bitcoin halving.” AS financial advertising Come on, it couldn’t be simpler than that. However, as readers understand, the reality of Bitcoin and other cryptocurrencies is much more complicated and murkier than this marketing material suggests. The promised increases in value are tempting, but cryptocurrencyits volatile nature looms over it. Such brochures gloss over the fact that the industry is full of unpredictability regulatory changes, cybersecurity threats and market manipulation schemes. Furthermore, cryptocurrencies’ lack of intrinsic value and complete reliance on speculative behavior hardly make them the kind of asset you can rely on to ensure your kids don’t have to use public transportation in 2050.
However, the strangest part of this presentation is not what it says, but what it doesn’t say. Unlike any other financial product, there is no disclaimer on the booklet. In this country, as in any well-regulated market, no one can advertise or promote any financial product without substantial legal oversight and disclaimers. Take mutual funds. Whether anyone has invested in one or not, they will have heard or read: “Mutual funds are subject to.” market risks.’ However, Bitcoin can be advertised without any warning or disclaimer. All this pamphlet stated was, “the Government of India is registered.”
In the aftermath of last year’s FTX debacle, I was really happy about the absence of officials cryptocurrency regulations in India.
To a certain extent, one could say that cryptocurrencies should remain unregulated, allowing the people who practice them to face the consequences of their actions. They should have the autonomy to risk financial ruin on their own terms. However, contrary to what one might have hoped, the FTX scandal it did not prove to be the death knell for cryptocurrencies. This suggests that the cryptocurrency market could be a permanent fixture in the global financial landscape. The FTX incident proved that a crypto venture can attract billions investors around the world, completely mismanage it and yet fundamentally not undermine the core principles of cryptocurrency. The profit potential is simply too significant and easily attainable.
We have reached a point where everyone thinks cryptocurrency is a legitimate asset class. While there may be some regulatory hurdles, these will eventually be overcome. As the sales brochure states, another surge in value is inevitable, resulting in a substantial increase in price wealth of those who have cryptocurrency. With each surge, a new wave of unsuspecting savers around the world will put their financial well-being at risk. In each wave there will be a new batch of potential victims. Any speculative asset that can randomly double and halve is well-equipped to be exploited to attract newcomers. Clearly, this is a role that Bitcoin is now playing. Unfortunately, this may happen in the near future. The question we need to answer, as individual investors, is what are we going to do about it? How will we save ourselves from this madness? Ultimately, the responsibility falls squarely on each individual to navigate this treacherous terrain with caution. The incessant lure of fast money cannot be the principle that guides our financial decisions. There are those who will understand it and those who won’t. Which group will you be in? The author is the CEO, SEARCH FOR VALUE