Investors, who are looking for legitimate investment, should avoid cryptocurrency

Bitcoin is all the rage as its market price keeps climbing and investors make record profits from it. As everyday investors begin to form investment pools to get into the hot crypto market, industry observers have begun hawking all kinds of new ways to take advantage of the burgeoning market.

Traditional stock market investors, bankers, and economists have long sounded the alarm that the cryptocurrencies like Bitcoin are no more than sophisticated Ponzi schemes. The scary thing about this investment scheme is that most people investing in it now don’t understand or realise how speculative it is in nature. Meaning, Bitcoin and other cryptocurrencies are essentially worthless. Their value is determined by people with an economic interest selling them for the highest price to the hungry investors.

Bitcoin and other crypto tokens are questionable investments for the following reasons:

• Cryptocurrency is not supported by any resources, real estate, services, or goods.

• Cryptocurrency does not contribute to the economy in any way (e.g., employment, taxation, social welfare).

• The investors are getting a string of numbers in exchange for their fiat currency — nothing else.

• For Muslims, 25 per cent of the world’s population, it is debatable whether investing in cryptocurrency is halal or haram.

No connection to real-world goods and services

Bitcoin and other cryptocurrencies are not connected to any real-world goods and services. That means that they are not affected by the health of an economy or its growth. Consequently, cryptocurrencies are highly volatile and their price movements are impossible to predict and explain. Many industry observers believe that significant price movements, up and down, are the result of market manipulation. Crypto market manipulation is easy because most crypto tokens are held by a small number of investors, usually less than 50. If the major investors decide to sell off their crypto tokens in large amounts, the value of their tokens will sharply decline. They can also drive up the prices with pump and dump schemes.

No societal or economic benefits from cryptocurrency

Cryptocurrencies like Bitcoin were designed to be transferred between the two parties involved in a transaction. There is no government oversight of it, independent audits done to it, or even any transactional gatekeepers to resolve any problems with it. The result is that this alternative digital currency does not positively benefit the society, financial institutions, or economies that it feeds off of for growth. It literally removes money from local economies and replaces it with digital code that can only be spent online with selected businesses. While this may reduce taxation on large transactions, it does not contribute to the maintenance of the investors’ societies, economies, or social welfare. It is the ultimate selfish way to invest and trade because the costs are borne by the public, but the benefits are limited to the parties involved in the transaction. In short, cryptocurrency transactions rely on real-world businesses, economies, and infrastructure to exist even though they do nothing to support it.

Investment similar to the Dot-com bubble

Cryptocurrency investors buy crypto tokens with fiat currency (e.g., USD, EUR, JPY). In exchange for the fiat currency that they can spend in local economies or transfer around the world, they get a string of numbers. The string of numbers is unique and gives them special access to a token with some market value that is based on nothing and backed by nothing. This is the conundrum, how do you invest in a string of numbers that is backed by nothing, produces nothing, and that doesn’t impact your world or the things that have created it.