You probably have a friend, relative or colleague who has “Bitcoin“or”Dogecoin“In the last few months. And you’re probably wondering what these words mean or why they are such a big deal.
Your friend or relative may also have encouraged you to invest in Bitcoin or Dogecoin. What exactly are these things and is it a good idea to invest in them?
Both answers are a bit complicated, but perhaps the best advice is “use caution”.
“Bitcoins and other cryptocurrencies like Ether and Dogecoin are digital currencies and Bitcoin is the most popular cryptocurrency,” says Neil Grayson. Grayson heads the Corporate and Regulatory Practice Group for Financial Institutions at Nelson Mullins Riley & Scarborough, the largest law firm in South Carolina. One of his areas of activity is digital currencies.
“They are a potential substitute for the US dollar and other fiat currencies or government-issued currency that is not backed by a physical commodity, as well as gold,” continues Grayson.
It sounds promising until Grayson goes a little further.
“Neither Bitcoin nor any other cryptocurrency has anywhere near stable valuation, so they are all still very speculative investments. Your current judgments are driven by emotion rather than rational analysis. ”- Neil Grayson, Nelson Mullins Riley & Scarborough
“The fascinating thing about cryptocurrencies is that they have no value if they fail to become currencies and a trustworthy medium of exchange,” he says. “I don’t mean NONE.”
And when it comes to Dogecoin, Grayson doesn’t mince his words.
“There is merit behind Bitcoin, but I think Dogecoin is a big joke,” he says. “In fact, it was made as a hoax, and as far as I can tell, the reason for its incredible surge in rating is solely due to the hype on social media. And the end result won’t be any different from that of a traditional Ponzi scheme. The early investors will make a fortune – should they get out early – and the later investors will collectively lose the same fortune. “
Experts estimate that there are at least 4,000 CRYPTO CURRENCIES today
“If Dogecoin were a company,” he adds, “and the people promoting Dogecoin on social media were insiders of the company, it would be a classic pump-and-dump system and they would face significant civil and criminal penalties Faced with obligations. “
That might sound like black and white advice not to invest in cryptocurrency, but Grayson says there is a significant gray area despite the naysayers.
“As you must have heard, Warren Buffett once said that cryptocurrencies are likely made of squared rat poison,” he says, “and JP Morgan Chase’s Jamie Dimon said that cryptocurrencies are ‘a scam worse than tulip bulbs’. Obviously, not everyone agrees with these opinions as the market value of all cryptocurrencies was around $ 2.5 trillion. “
Grayson says the real litmus test of whether or not Bitcoin or Dogecoin will be profitable in the long run is yet to come.
“The challenge is figuring out what Bitcoin or any other cryptocurrency needs to become an accepted medium of exchange,” he says. “The US dollar, which is legal tender for all public and private debt, is no longer backed by gold, but by the power of the US government. It is an accepted currency because everyone is willing to take US dollars because they believe everyone else will take US dollars; it is a self-fulfilling balance. It is an open question whether Bitcoin or any other cryptocurrency will achieve this same level of trust and acceptance. “
Ultimately, however, Grayson appears to be pessimistic about the future of cryptocurrency.
“At this point, I firmly believe that overall cryptocurrencies are in a bubble,” he says. “Neither Bitcoin nor any other cryptocurrency has anywhere near stable valuation, so they are all still very speculative investments. Your current evaluations are determined more by emotions than by rational analysis. “