CHICAGO, Ill. - After skyrocketing 86,000% in just a few days, the explosive new cryptocurrency known as "SQUID" fell to zero this week. It turned out to be a scam with con artists taking more than $ 3.3 million in money from investors. Cryptocurrencies can be dangerous. Still, it is a gamble that attracts merchants of all ages.
If you have never heard of cryptocurrencies, you are now a small minority. New research suggests that only about 4% of US adults surveyed are unaware of the digital or virtual currency that crypto uses for security.
โThe way to make money from crypto is by selling it to someone who thinks it will be worth even more in the future than you think it will be. It's what's called 'the dumbest theory' of investing, "said James Royal, Bankrate.com analyst and author of the book."The zen of savings conversions. "" I think the hot potato is a good metaphor to think about what is happening in the cryptocurrency markets right now. "
It has been more than 10 years since the decentralized digital currency Bitcoin was introduced and since then, countless competitors have launched their platforms in the race to create more digital currency.
โBasically what you are investing in with crypto is not an asset backed by something. It is not backed by cash flow. It is not backed by an underlying asset, โRoyal said.
Investor confidence varies by generation with millennials leading the way.
According to a recent Bankrate survey, 49% of millennials are at least somewhat comfortable investing in crypto assets like Bitcoin, compared to 37% of Gen Xers and just 22% of baby boomers.
โWe are facing a period of time in which real wages have not increased in decades for many people. So, I think a lot of people think that cryptocurrency is a kind of lottery ticket, "he said.
But Royal says that while that lottery ticket could bring in substantial winnings, it also carries substantial risk. An estimated one-third of people have been scammed by some kind of fake email and an impostor website.
"In a fast growing area like this, where it is not clear exactly who is real and who is fake, it is important to understand that you can be scammed," he said.
Suspicious cryptocurrency projects can quickly turn into scams, something the Squid Game-inspired cryptocurrency has shown in recent weeks.
"It lost everything, it literally lost 100% of its value in minutes," Royal said.
Royal says that if you are getting into digital currencies, be sure to use a reputable exchange or broker like Robinhood or Interactive Brokers. Try to avoid the get-rich-quick mentality of investing and be careful not to allocate too large of your portfolio to cryptocurrencies.
"You are not looking at assets or cash flow, you are looking at the psychology of the rest of the market to find out how you should act," Royal said.
Because in the end, it says that the virtual currency is driven by optimism and market perception.
