Cryptocurrencies are the amusement parks for millennials. In an era when people get a day’s worth of entertainment from their smartphones, what better endeavor than being able to experience a thrill ride from your cellular device! When one goes to an amusement park, they do so to have an experience and enjoy themselves. Through the course of their visit, it is natural to expect many, if not all, of the rides, will provide significant excitement with heart-stopping thrills. Cryptocurrencies are no different.
Cryptocurrencies are an agent of exchange, conceived and kept electronically in a “blockchain.”
Blockchain technology removes the necessity for a third party intermediary by forming a stable, enduring open verification of all transactions on a network. Because of this, a buyer and seller communicate directly, while the exchange is noted on the blockchain ledger. These “blockchains” employ encryption techniques to regulate the creation of monetary units and authenticate the exchange of funds. Bitcoin is probably the most widely referenced cryptocurrency currently.
Much like amusement parks, cryptocurrencies have a price of admission. Unlike amusement parks, this “price of admission” can yield you financial gains. With any risk in investment, there is a chance one will lose their money. However, if you view it in a metaphorical way like visiting an amusement park, it should yield more financial gains than financial losses.
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For example, say you are visiting Great Adventure. The price for one ticket for general admission is $76.99. With that fee, you will go on rides, experience thrills, chills and joyful exuberance that will result in nothing but memories and laughter. Now, take that $76.99 and invest it in a cryptocurrency and you will experience the same thing!
This morning, I took $76.99 and invested it in the cryptocurrency offered on the Coinbase exchange known as Bitcoin Cash. Full disclosure, I could not even tell you what Bitcoin Cash is. (Ultimately, this is problematic and foolish and not a good idea, and I highly recommend doing anything remotely like this.)
I entered the amusement park, which I shall refer to as CryptoWorld at 5 am this morning. I paid my admission fee of $76.99. At 5 am, Bitcoin Cash was going for $2,356.17. But, hey, I was in the park. I was ready for fun. I was prepared for thrills. I was prepared for excitement.
About an hour later, at 6 am, Bitcoin Cash was at $2374.37. My “ticket” had increased .77%! Now, about an hour in CryptoWorld I had made money – albeit a significantly small amount. So, within an hour, I experienced a modest thrill of gaining money. Compare that to an hour in Great Adventure where I would not have made any money. And, most likely, I would have probably lost money by spending it on snacks or other refreshments.
By 7 am, Bitcoin Cash had increased to $2469.78. That is a $100, plus, increase in value since my entrance. What a thrill! Can you contrast that to two hours in Great Adventure? Again, no increase from the $76.99 and most likely you will have the thrills and the memories, but you will have a lighter wallet from purchasing refreshments.
However, by 8 am, things started trending downhill. It was now worth $2440.76. This is comparable to jumping on the “El Diablo” rollercoaster and heading towards your first dip. And just like the dip on “El Diablo,” so too did your investment.
But that is nothing, during the next two hours, Bitcoin Cash’s value will have dropped to $2435.15 and increased to $2673.51. That represents an increase of thirteen percent from your first minute in CryptoWorld. And much like that “El Diablo” rollercoaster, you have experienced ups and downs, fear and laughter. You now have an adrenaline rush. You do not know whether you want to stay in and go for “another ride” or go home. You decide to stay.
By 6:32 pm, Bitcoin cash had reached $2944.93. I was in complete euphoria. That represented a 25% increase. My $76.99 “ticket” had made me nearly $20. But like any good thrill ride, it was not quite over just yet, and a significant, great, final dip was approaching. By 11:28 pm, Bitcoin Cash’s value had fallen to $2371.95. My gains had gone. My adrenaline rush had led me to lose all my gains.
And much like a visit to Great Adventure, my visit to CryptoWorld left me with memories of my thrills, my chills and my memories of what I experienced that day.
A key to investing in cryptocurrencies – and most likely any investment really – is never to risk more than you can afford to lose. This was a reason I used the price of admission to Great Adventure in the analogy mentioned above. $76.99 was a set amount that if you paid for a ticket to Great Adventure, your expectation with this fee would be the described emotions that come with visiting such places. One does not spend $1000 on a ticket for admission to Great Adventure whereas one can invest $1000 in cryptocurrencies. If you view it as an expense that you can afford to lose without it devastating you financially, cryptocurrencies can be fun; much the ways amusement parks are fun. A distinct difference in this analogy, of course, is that the more money you invest, the higher the potential return and profit. However, the higher amount of money you invest, the potential for a higher loss exists.
While cryptocurrencies are the latest fad, not all people are sold on them. Anything new has its detractors and cryptocurrencies are no different. Especially something as volatile as a cryptocurrency. Just last night, South Korea major exchanges were raided by the police. As a result of occurrences like this, and a bit – pun intended – of it is unknown, many people are skeptics.
Renowned billionaire investment guru Warren Buffett told CNBC on Wednesday the current enthusiasm over bitcoin, and other cryptocurrencies won’t end well. “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” the chairman and CEO of Berkshire Hathaway said.
Previously, J.P. Morgan Chase CEO Jamie Dixon also criticized and denounced cryptocurrencies. In September, Dixon referred to it “as a fraud.” “It’s just not a real thing, eventually it will be closed,” Dimon said at the time. He has recently backtracked on these statements (perhaps after his own amusement ride in CryptoWorld).
The fate of cryptocurrencies is far from resolved. It still has its detractors, but it grows in popularity nevertheless. While Bitcoin is king, other “coins” such as Litecoin and Ethereum have come to prominence as a result of this craze. Is this the future? Is this a trend? Or are these merely new amusement rides to give willing participants a thrill?
Do you think amusement parks make for a good analogy when explaining cryptocurrencies? Have you ever invested or considered investing in cryptocurrencies? Let us know in the comments below!