“Stay away from it. It’s a mirage, basically. In terms of cryptocurrencies, generally, I can say almost with certainty that they will come to a bad ending” — Warren Buffett, CEO of Berkshire Hathaway
Sounds like a bleak prophecy… According to a solid Wikipedia page, this gentleman definitely has got some financial knowledge. Presumably, he repeatedly criticize cryptocurrency based on it. But is it really as bad as some people say?
Thousands of cryptocurrencies exist now but only a handful accounts for a lion’s share of the market. The rest basically don’t have any value because of low market liquidity. The reason for their presence is clear: having witnessed an unbelievable story of Bitcoin that soared from several cents up to 58 grand, people are ready to invest their hard-earned dollars into new Altcoins holding out much hope that something similar can happen with them.
This hype train carried Initial Coin Offering (ICO) funding to bad fame. Back then, piles of start-ups with the word “blockchain” and no transparent strategy easily got finances and disappeared shattering all aspirations.
Even today, new players get in the game almost every day but it’s crucial for them to have something behind the sole idea. It’s dangerous not only for investors but for the market as well, since collapse of unstable cryptocurrencies can kill the entire sphere dragging the pioneer Bitcoin down into an abyss.
Transactions in the cryptoworld is safe and anonymous. Although all information on transactions as to when and how much is publicly available, the data about sender and recipient are securely classified. This concerns governments a lot and hinders using cryptocurrency as a legit payment system because there is a huge space for illegal actions such as money laundering, drug trafficking, etc.
Unfortunately, as soon as anything becomes famous and lucrative, there comes a game of interests when sneaky individuals try to get the most out of the hype. Along with Bitcoin boom, obvious frauds (in hindsight of course) got in the way. Since it was something new, many people simply didn’t have enough information. There was perfect time for pyramid schemes, which were created as a cryptocurrency (OneCoin). Unlike real ones, all information was centralized and there was no blockchain so company-owner could arbitrarily change any data.
Of course, talking about fraud can’t go without hackers. The most brazen and audacious thing was hacking of Twitter accounts of billionaires, politicians, companies, etc. Scammers distributed cryptocurrency on their behalf. They offered users to send them Bitcoins and promised to double the amount received and send it back. It’s surprising but they managed to collect almost $100000 in Bitcoin.
Blockchain is the basis of cryptocurrencies and involves a huge computer performance and, consequently, high energy consumption. Bitcoin mining is a very energy-intensive process. Some big mining farms may consume as much electricity as small towns. As for the environmental damage, it depends on the power station. Coal-fired or renewable energy. Big difference.
Now you can say that you don’t do mining because you care about environment but not because you don’t know jack about it.
There is no way “mining fever” doesn’t affect people. Besides brand new graphic cards (which are in shortage), miners are frantically buying laptops in order to produce more cryptocurrencies. Angry gamers resent being deprived of good hardware. Why companies don’t do anything? They actually do but not what you want. Some of them sell their products directly to miners, of course, at a higher price. As we know, capital will produce eagerness with 20% profit and it’s all onwards and upwards from there.
Anyway one has to bear in mind that cryptocurrency is an abstract set of numbers far from real world so their rate is volatile. It may rocket up by several grand but next day Elon Musk posts something on Twitter and it plummets right away and makes traders run to the nearest pharmacy to buy a new bunch of sedatives.
However, cryptocurrency has been counted out so many times that it’s better not to remember every other critic. Until this day, it has defied all backlash so that if you brood over that day when you didn’t get into this business, probably you still have time to catch up on it. It seems that “cryptothing” is going to stay in the game for a while.258 views