RJust when you thought you were free from the flood of talk about cryptocurrencies and non-fungible tokens, I’m here with another article on the subject, but don’t worry. Unlike some of my previous articles, this one will be about the economics of this space rather than the technology.
To start, I want to jump right into the sales pitch that people who invest in NFTs often give to the undecided. Note how I phrased it as well. NFTs are often presented with the same lofty ambitions and advantages that I have discussed and rebuked in previous articles.
However, alongside all this there is a recurring theme. If you buy now, your investment could be worth thousands more in the future. Images of early Bitcoin investors who have since cashed out and enjoying lavish lifestyles have flooded the internet, and if you want to be that person, then you need to invest now.
At this point, it’s important to remember an important point I made in my last article; to mention NFT is to mention cryptocurrencies.
By getting people to invest in NFTs, digital art, and other blockchain-based media, early investors can kill two birds with one stone. Both can increase the value of the cryptocurrency underlying their NFTs and convince people to provide the cash needed to cash out themselves.
After all, a stock is worth nothing if no one is willing to invest. As a result, you can only get paid if people want to buy your holdings from you, and in the case of cryptocurrencies, NFTs provide the jumps in demand needed for many to withdraw money.
The correlation between the rise in demand for NFTs and cryptocurrency withdrawals is so strong that you can see when large cryptocurrency investors began converting their holdings to cash by looking at the Ethereum share price in mid-May 2021 that collapsed following the media attention of NFT. almost at the same time.
Taken together, as mentioned above, this sounds like a pyramid scheme, and yes, you would be correct. Early investors trust people they know, a number that has increased exponentially across the internet, to buy, and these people expect more people to invest.
This pattern reveals that cryptocurrency is inherently a zero-sum game, a product of the big fool theory, which requires someone to be willing to resell an asset at an overvalued price by convincing an even bigger fool that it is worth even more. of what it is really worth. . Endorsed by the worlds of finance and technology as a system too complex for the layman to understand, blockchain, cryptocurrencies and NFTs are being sold as something much more idealistic than it really is, a broken system from top to bottom used by scammers to make much more than a quick buck.
At some point, there will be losers.
The total number of dollars gained on the investment will equal the number of dollars lost on the investment, and given the high rate of entry and the demographics of the current wave of newcomers, the number of people on the losing side will exceed to the number of winners.
This is the zero-sum game of cryptocurrencies and unless you can convince someone to be a bigger fool then you are one of the losers, which means your biggest incentive as an investor is to attract more adopters.
But does this just sound like the stock market? This may sound true at first, but in reality, there are several differences.
The only one I really care to mention is that the stock is powered by a tangible entity whose profitability does not depend on the number of people buying, but on the success of the goods and/or services they provide.
The best that cryptocurrencies have to offer are NFTs and other blockchain-based media, the value of which really comes from the bland advantages of the blockchain itself.
This is where we get to the real empty promises provided by the whole system. For cryptocurrency to be viable, it relies on NFTs, but their niche properties don’t provide enough for any nuanced investor to see them as valuable.
As a result, many NFT street vendors have tried other ways to sell their product, and I use that term loosely, meaning creating a community and making a series of claims in the hope that it will appeal to their demographic of choice.
While the nature of these communities is what will be discussed in detail in my next and final cryptocurrency article, I want to discuss the claims made by these communities at this time.
Generally speaking, most of the copy-and-paste art collection NFTs that have circulated the internet in recent months have communities attached to them, validated by their claim that they are projects worth investing in rather than pieces of digital art that are really worth collecting.
In other words, if you were to buy a Bored Ape NFT, you would be buying a form of shares in the community and its projects, a kind of pseudo-business. To maintain this validity, they promise that the community will work on projects such as comics, video games, or a literal casino in the case of Betting Kongs NFT.
Will these promises be kept? Of course not.
These communities are not real businesses. They are all individualized zero-sum games that don’t have the connections, capital, or organization to run like a real business.
People who buy get caught up in the equivalent of a crowdfunding scam. Then, when a rug-pull allows the owner to sell their properties, make thousands, and disappear into the night, buyers have a worthless product that could be, as in the recent ‘Squid Game’-inspired crypto scam, literally impossible to sell. due to technology. behind the coin.
In other scams using a pump and dump strategy, many people may be recruited and organized to help inject value into the cryptocurrency only for the corresponding dump never to reach the promised point, causing them to lose money as the value increases. plummets because they weren’t inside.
Therefore, residing on Discord servers riddled with bots and scammers, these communities are full of delusional and vulnerable individuals, and there is no one to help them when they get the dumbest.