The Crypto Crash and investing lessons to learn

For a few months, nearly everyone knows the word “Bitcoin” and that Bitcoins have something to do with cryptocurrency. However, the opinions about Bitcoin are very different and the people are kind of divorce. In the last week, different factors caused an intense fall of the worth per Bitcoin, which maybe shows off the risk of cryptocurrencies.

The founder of Bitcoin and how it works

In 2008 a person or group with the pseudonym Satoshi Nakamoto published a whitepaper with the idea and concept of Bitcoin. This whitepaper presents an amazing and clever solution for an old problem. The concept enables an anonymous and not traceable trade of money in the form of “Bitcoins”. The virtual trading place of Bitcoin is named blockchain, which guarantees a safe peer-to-peer transaction of Bitcoins. Important to know is that Bitcoin only exists digital or better said in the mind and calculations of the Investors. There is no real worth behind Bitcoin, which leads to the main risk of Bitcoin. Nevertheless, around 71 Million people are using and trading Bitcoins with 22.000 companies that are accepting Bitcoins. This sounds very good, and yes, it is, but in the past also criminal persons used Bitcoins to buy illegal things on the Darknet or as payment substitutes for ransom. For example, the hacker group “Darkside”, which hacked an oil pipeline in the USA, demanded ransom in the form of Bitcoins, because Bitcoins aren’t traceable.

Chinese regulations, Musk- Tweets and other factors - the permanent risk of Bitcoin trading

The big advantage of Bitcoin, no regulations from any authorities, can quickly change into a disadvantage when governments are intervening in the trading market or big investors can influence the worth of Bitcoin. And this is exactly what happened. A few months ago the Chinese government prohibited companies with headquarters in China to trade or exchange Bitcoins. This caused a not-insignificant fall of the worth per Bitcoin. A few weeks ago Tesla CEO Elon Musk posted a Tweet in which he announced that Tesla won’t accept Bitcoins as payment for their cars anymore. This caused a fall of the worth per Bitcoin of 15%. It’s clear to see that the value course of Bitcoin is very flexible and impact sensitive. On top of these factors comes that these changes aren’t predictable. But it’s true that Bitcoins, especially Bitcoin Mining, the process of finding/creating bitcoins, can be very profitable. This is also the reason why so many people believe in this cryptocurrency.

Ups and downs - the current Bitcoin situation

In the history of Bitcoin and Wall Street 2.0: Blockchain, many people and companies got very rich in a short time and with a manageable effort, but also many of them lost a lot of money. At the moment (24.05.2021) one Bitcoin has a worth of ca. 36,000 US Dollars or ca. 30.000 Euros, which is in the absolute perspective very much, but relatively to the price some weeks ago a big down. To imagine the flow of bitcoin, it’s important to know that firstly behind Bitcoins isn't a real worth or any product and secondly, Bitcoins aren’t creating new value. This fact leads into a statement that describes the whole Bitcoin existence: Trading and exchanging Bitcoins is only the speculative calculated redistribution of money from a certain amount of available capital through a “high win or high loose” risk strategy.

Which lessons can we learn from the Crpytocrash?

1. Be aware of the risk

If you want to invest a certain capital into Bitcoin, you must be aware that the worth of Bitcoin can fall very quickly and no one can predict whether it will go up or not. So the risk of losing a lot of money, depending on how much you have invested, is there.

2. Minimize the risk as far as possible

Investing in Bitcoins may seem easy, but it would be very helpful if you read a lot about Bitcoins to dive deeper into the topic than this article does. A good opportunity for getting more information is coinbase.com where you can find a lot of information on all subtopics.

3. Think about whether Bitcoin is the best investment opportunity for you or not

With knowing the risk of investing in bitcoins you may think of investing in other things. It depends on what you believe would be the best opportunity to invest. However it may help, if you search for information about any investment opportunities such as stocks, ETFs, Bitcoins, valuable assets and capital funds. All in all the most important lesson to remember is thinking about the real value the risk would bring you.

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