Cryptocurrencies are the virtual amusement parks of the 21st century. In an era when people get a day’s worth of entertainment from their smartphones, what better endeavor than experiencing 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 great 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 known cryptocurrency to date.
Much like amusement parks, cryptocurrencies have a price of admission. Unlike amusement parks, this “price of admission” can yield you financial gains. Obviously, 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.
For example, say you are visiting Six Flags Great Adventure. The price for one general admission ticket 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 ... you will experience the same thing and you might make some money!
This morning, I took $76.99 and invested it in a cryptocurrency offered on the Coinbase exchange known as Bitcoin Cash. (Full disclosure: this is not investment advice.)
I entered the amusement park, which I shall refer to as CryptoWorld, at 5 a.m. one morning. I paid my admission fee of $76.99. At 5 a.m., Bitcoin Cash was going for $2,356.17. But, hey, I was in the park. I was ready for fun. I was ready for thrills. I was ready for excitement.
About an hour later, at 6 a.m., Bitcoin Cash was at $2374.37. My “ticket” had increased 0.77 percent! Now, in about an hour in CryptoWorld I had made money – albeit a significantly small amount. So, within an hour, I experienced a modest thrill, gaining money. Compare that to an hour in Great Adventure and I’m doing pretty well. In fact, I’d probably be spending more money on snacks or other refreshments. Advantage: CryptoWorld.
By 7 a.m., Bitcoin Cash had increased to $2469.78. That is more than a $100 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 admission fee, and a lighter wallet from purchasing refreshments.
However, by 8 a.m., things started trending downhill. It was no longer worth $2440.76. This is comparable to jumping on the “El Diablo” roller coaster and heading towards your first dip. And just like the dip on “El Diablo,” so too did my investment.
But that $100 dip was nothing. During the next two hours, Bitcoin Cash’s value dropped to $2435.15 and then increased to $2673.51. That represents an increase of 13 percent since my first minute in CryptoWorld. And much like that “El Diablo” roller coaster, I 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. I decided to stay.
By 6:32 p.m., Bitcoin Cash had reached $2944.93. I was in complete euphoria. That represented a 25 percent increase. My $76.99 “ticket” had made me nearly $20. But like any good thrill ride, it was not quite over yet and a large, great, final dip was approaching. By 11:28 p.m., Bitcoin Cash’s value had fallen to $2371.95. My gains had gone. My adrenaline rush had led me to lose all my profit.
Much like a visit to Great Adventure, my visit to CryptoWorld left me with memories of thrills, chills, and what I experienced that day.
A key to investing in cryptocurrencies – and most likely any investment at all – is to never risk more than you can afford to lose. This was the reason I spent the price of an admission ticket to Great Adventure on my crypto-investment.
One would never spend $1,000 on a ticket for admission to Great Adventure whereas one could easily invest $1,000 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.
While cryptocurrencies are the latest fad, not all people are sold on them. Anything new has its detractors and cryptocurrencies are no different.
Renowned billionaire investor Warren Buffett told CNBC that the current enthusiasm over bitcoin and other cryptocurrencies won't end well.
Previously, JPMorgan Chase CEO Jamie Dimon also criticized and denounced cryptocurrencies. In September, Dimon 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 continues to grow in popularity. 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?
Christopher Tremoglie is a Russian and Eastern European Studies major at the University of Pennsylvania.