Home Investing Reasons Why The Crypto Dream Is Turning Into A Nightmare

Investing

Reasons Why The Crypto Dream Is Turning Into A Nightmare

Darren December 24, 2023

The latest crypto winter has arrived and is wreaking havoc across the world of blockchain transactions. Many people poured all of their savings into their crypto dream but this was a massive mistake. Even the biggest currencies like Bitcoin and Ethereum have suffered massive crashes and cost investors millions of dollars.

Today we’ll look at how the crypto dream turned into a living nightmare for many of these people. We’ll analyze the struggles that this digital world is facing and why it may never achieve mainstream popularity. Meanwhile, we’ll also look at the sharp decline in NFT popularity.

Higher Interest Rates

The Federal Reserve announced another interest increase as they added fuel to the Crypto fire. There are many reasons why investors are having problems at the moment. But this is arguably the worst time for federal institutions to be making changes. They’re trying to slow inflation but this hurts cryptocurrency.

Historically, Bitcoin suffers drops every time the Federal Reserve meets so it’s not surprising that it happened again. However, other external factors made this a difficult situation for developers and investors. Unfortunately, crypto isn’t immune from the pain of external markets (via Time).

NEXT >>

No Tangible Value

The main issue with NFTs is that they have no tangible value. They exist in the metaverse but this means nothing to the majority of the eight billion people on the planet. Buyers see them as a digital certificate of authenticity but there’s nothing useful about them (via EY).

Proponents claim that this is true about standard currency or gold. They’re indeed valuable because we prescribe importance to them. But the difference is that they are tangible objects with a value that goes beyond data. That’s why many people think that they mean nothing.

<< Previous

NEXT >>

Environmental Regulations

The environmental cost of cryptocurrencies is staggering because they use a ludicrous amount of electricity. Countries like Ireland and Sweden consume less energy than global Bitcoin mining. Unsurprisingly, this is extremely controversial because of the threat of climate change to the world.

Now the U.S. and E.U. are threatening cryptocurrencies with penalties if they don’t clean up their act. This was a significant driver behind Ethereum’s ‘The Merge.’ Many crypto creators are slowly realizing that they won’t be able to operate with impunity forever (via The Guardian).

<< Previous

NEXT >>

Criminal Association

One of the main arguments against cryptocurrencies is that they don’t make life easier for regular people. Critics claim that criminals are the only users who benefit from them. Realistically, this is an overblown narrative because crypto only accounts for about one percent of overall transactions (via The Wall Street Journal).

But cryptocurrencies can’t shake their association with crime. Furthermore, several governments use this as an excuse to ban them or to introduce intense regulations. Regular people also think that this is the dark web and don’t want to take any risks. Ironically, only increased regulation will change this perception.

<< Previous

NEXT >>

Problems In El Salvador

El Salvador made headlines across the world when it became the first country to accept bitcoin as tender. They launched a virtual wallet and also installed bitcoin ATMs across the nation. However, the crypto dream failed in the Central American state because locals aren’t using it.

Internet access remains an issue in El Salvador so this isn’t surprising. The government tried to increase its popularity by excluding it from capital gains taxes. But this didn’t work because many El Salvadoreans dealt with identity theft and most businesses don’t use it (via Bloomberg).

<< Previous

NEXT >>

No Easy Money

There’s an old saying that if a deal appears too good to be true, then it probably is. Many people jumped on the crypto bandwagon because they believed that it was stupid not to. However, the recent crash left them with eggs on their faces and a hole in their wallets (via CNET).

This huge market crash wiped out two trillion dollars of market capitalization. This is an incredible amount of money and shows how many people bought into the crypto dream. But sadly, many of them lost everything because this is a massive gamble. Unfortunately, it’s too late for most of them now.

<< Previous

NEXT >>

More Scandals Await

The adage says: “Fool me once, shame on you. Fool me twice, shame on me.” Many would-be crypto investors are applying this to the metaverse because they don’t want to risk losing everything. They see cryptocurrency as too volatile and unsafe for them to risk real cash.

More scandals and problems will occur soon because the global market is unstable. Crypto can’t shake off real-world influences despite its biggest dreams. There is less naive money available for buyers to spend on this turbulent commodity (via Mashable). But stability won’t occur unless there’s more regulation.

<< Previous

NEXT >>

Crypto Bans

One increasingly big problem for cryptocurrencies and developers is that some countries are banning them. China is the most noteworthy nation because of its economic power and a massive population. But other nations including Qatar and Morocco banned them completely.

Meanwhile, more states are bringing in tighter restrictions and regulations. These include increased taxes for investors as well as legislation around their use. This goes against the original ethos of this digital world and may kill the crypto dream. It remains to be seen how the West reacts (via Euro News).

<< Previous

NEXT >>

Terra Luna Crash

The Terra-Luna Crash is one of the most serious implosions in crypto’s short history. Terra was a strong example of a stablecoin with a fixed value of one U.S. dollar. In short, developers create them as safe investments alongside floating currencies with fluctuating values (via The Guardian).

However, when the latter loses all of its value it also affects the stablecoin. That’s exactly what happened to the Terra and Luna coins as they left owners with nothing. They suffered staggering losses after a death spiral went into full flow. It was a nightmare for these investors and severely impacted the market.

<< Previous

NEXT >>

Bored Ape Yacht Club

Justin Bieber inadvertently showed the world the dangers of following a tech trend. He bought into the Bored Ape Yacht Club but suffered the consequences. This is a collection of 10,000 NFTs that shows simians in poses with cool clothes. The popstar used 500 Ethereum to get his NFT in January 2022.

At the time this was the equivalent of $1.3 million. However, now the stupid ape picture has a value of $70,000. This is a massive drop of about 95% and a huge blow to buyers. Bieber has millions in the bank so it won’t hurt him much. But it will sting people who can’t afford that (via Insider).

<< Previous

NEXT >>

Not Actually A Commodity

Gold is one of the most popular traditional investments because of its consistency. Yes, it will fluctuate but the reality is that gold is a finite commodity. Even if the value of gold drops, owners can still use their gold for something else. That’s not possible with crypto coins because they only exist in the metaverse.

This means nothing to most people in 2022 who only concern themselves with material wealth. Some of them use digital wallets but this isn’t the same as a crypto wallet because the money is real. Many crypto buyers mistook their fantasy for something tangible in the real world (via CNBC).

<< Previous

NEXT >>

Mining Challenges

Crypto mining is crucial because it runs software to solve algorithms. However, it takes up intense amounts of energy and this is a problem for some jurisdictions. Kazakhstan was one of the biggest mining nations but it withdrew power during electricity shortages. Many miners left the country because of the inconsistencies.

But this had a big impact on Kazakhstan’s economy because they contributed billions of dollars. China also banned mining completely and this had a staggering impact on the crypto world. Most of the world’s mining took place in the Middle Kingdom so it was a massive blow (via The Conversation).

<< Previous

NEXT >>

Political Division

Everybody politicizes everything these days regardless of the original intention. It doesn’t matter if it’s masks or animated frogs, because somebody will find an issue with it. These days, crypto buyers also have a stereotype. Some people associate them with the incel movement (via The Guardian).

Most incels are bloggers rather than crypto buyers because they don’t have any money. But it’s an unfortunate connotation that these currencies can’t shake off. It’s difficult to remove negativity from an entire movement. That’s why the crypto dream will never happen for some people.

<< Previous

NEXT >>

Cost Of Living Crisis

Most people don’t want to spend their hard-earned cash on an intangible investment during a cost-of-living crisis. The cost of gas is on the rise and regular folks can’t pay their rent. Needless to say, this is having a massive impact on the crypto world. Potential buyers aren’t taking risks at the moment.

This isn’t a shock because there are many unknown factors in the world right now. There’s a war in Ukraine with potential food shortages on the way. Meanwhile, European citizens are experiencing an energy crisis because Russia supplies most of its gas. It’s not an ideal time to risk their savings on a volatile purchase (via Euro News).

<< Previous

NEXT >>

Lack Of Trust

The main reason why people don’t trust crypto is that they don’t understand its value. They think that it is completely worthless because they can’t touch it. This limits the potential of cryptocurrencies because there is a smaller pool of buyers. They note that the energy consumed by mining coins costs more money.

Then there is a lot of fearmongering because of the recent scandals. Most ordinary citizens don’t trust crypto because that’s what they hear about. They’re not interested in reading articles with technical jargon about its merits. Instead, they see the bad news and that’s all they worry about (via Medium).

<< Previous

NEXT >>

Athlete Woes

Odell Beckham Jr. is one of the most recognizable athletes in the U.S. The NFL wide receiver made headlines in 2022 because he lost a lot of money. He left the Cleveland Browns for the L.A. Rams and won a Super Bowl ring. But it wasn’t all good news for the player.

That’s because he agreed to a $750,000 contract with the franchise. But he wanted them to pay him in Bitcoin. Then the value of the currency dropped and left him with just $35,000. Another famous athlete, Francis Ngannou also lost money after the UFC paid him in crypto (via Sporting News).

<< Previous

NEXT >>

Blockchain Tracing

People think that every criminal is using crypto to launder money. However, this is untrue and police forces are adapting to the new metaverse arena. They’re using blockchain tracing to identify illegal exchanges. This is turning many criminal organizations away from these currencies.

It seems that even drug cartels no longer trust the crypto dream. There have been some substantial busts over the past year as agencies shut them down. Ironically, one of the biggest stereotypes about cryptocurrencies will no longer be true. But it can’t shake off its shady image (via Grid).

<< Previous

NEXT >>

In-Sync With Stocks

Before the global health crisis, the biggest cryptocurrencies stood apart. They didn’t move in sync with regular stocks and this made them more appealing. Some investors saw their risk but accepted it because they diversified their portfolios. But now they are on the same trajectory as regular stocks.

The likes of Bitcoin and Ethereum are risker investments than regular company stocks. Now as they move in a similar direction, they’re becoming less attractive. Buyers prefer to spend their money in a safer way instead of risking it on something that can plummet in value (via IMF.org).

<< Previous

NEXT >>

Government Intervention

The Biden White House shook up the crypto world in 2022. America’s President announced that crypto’s time in the Wild West was over because there were new rules. It was obvious to most people that these were coming but some crypto diehards refused to accept it.

It’s no surprise that the federal government wants to counter illegal financial activity. They also want to promote stability and reduce the risk of citizens losing everything in risky investments. However, this is bad news for developers who wanted Bitcoin to replace the gold standard (via The News & Observer).

<< Previous

NEXT >>

Sports Franchise Greed

Global sports teams and franchises are paying the price for their greed. Many of them partnered with crypto platforms and currencies as they groped for money. Some of them even exploited their fans by selling NFTs. Most of the latter don’t retain value and left their buyers in a hole (via SBNation).

Meanwhile, many of these crypto platforms bring a lot of negativity. That’s because they disappear in an instant as several Premier League teams experienced. This also influenced fans because they don’t trust crypto now. The same issue happened with the UFC after their deal with Crypto.com went bust.

<< Previous

NEXT >>

Crypto Storage

These days it’s crucial to know where to keep crypto coins. FTX imploded and took many people’s investments with it because of their misplaced trust. Most experts advocate storing coins in a wallet rather than on an exchange. It appears that the latter is too susceptible to market problems.

They also advise buying well-known crypto coins rather than smaller currencies. This makes sense because nobody knows what will happen with the latter. Even the most established platform and coin can suffer extreme problems. That’s why nobody should be surprised if it goes wrong (via Fool.com).

<< Previous

NEXT >>

Limited Market

NFTs began as a novelty that allowed rich people to flaunt their wealth and brands to exploit their fans. But they were always going to run out of gas because of their limited market. Not many people are willing to waste their money on them. That’s because most ordinary citizens think they’re worthless.

We’ve spoken already about how they have no tangible value. They are also susceptible to sharp declines in value. Meanwhile, there are roughly about five NFTs available for every willing buyer. The saturated market is reducing its appeal to potential investors because the novelty is wearing off (via MSNBC).

<< Previous

NEXT >>

Rug Pulls

Fraud rises its nasty head in every form of investment. The NFT world should probably have seen rug pulls coming because it was obvious. In short, Developers advertise NFTs to attract potential investors. Then they steal the projects’ money before vanishing forever into the void (via NFT Now).

This practice is on the rise because many criminals want to exploit the crypto dream. However, governments are clamping down on the activity. In 2022, the U.S. Department of Justice charged two people after a $1.1 million NFT bust. But would-be investors should beware because it’s not easy to catch perpetrators.

<< Previous

NEXT >>

Crypto Fraud Rising

A major issue for crypto developers is the rise of crypto fraud. Enterprising hackers are finding new imaginative ways to steal information or trick investors. Many people fall prey to fake celebrity scams. U.S. citizens allegedly lost up to a billion dollars because of crypto fraud.

That’s an amazing amount of money and it’s frightening casual buyers. They don’t want to lose their life savings as they try to get rich quickly. Younger people experience more crime than older because social media influences them. Ironically, it’s the tech-savvy who suffer more problems (via Cyber News).

<< Previous

NEXT >>

Negative Sum

Realistically, cryptocurrencies are a negative or zero-sum investment. Essentially it requires somebody to buy an overpriced asset to sell it to someone else for an even higher price. There are many idealists in the crypto world but most people want to make money quickly (via Creightonian).

This means that they’re willing to exploit potential buyers and leave them with a worthless purchase. We’re seeing this in the world of NFTs now as people struggle to offload them. Sadly, the crypto dream isn’t as romantic as many buyers originally thought. Now that’s costing the world a lot of cash.

<< Previous

NEXT >>

Lower Resale Value

The era of morons spending thousands or even millions on NFTs is over. That’s because they learned that they don’t have a big resale value. They thought that the price of NFTs would continue to soar and that they would profit. But now buyers are experiencing staggering losses (via Decrypt).

Global crypto and NFT losses have hit $25 trillion over the past 12 months. One Crypto Punks owner sold an NFT for seven million dollars less than the original price. This is a huge loss and shows the dangers of investing in this volatile market. It’s a warning to every buyer because it’s chaotic.

<< Previous

NEXT >>

Lack of Education

The problem is that many people don’t understand how digital investments work and lose everything. It’s very difficult to make money from traditional stocks and shares because they require an education. Cryptocurrencies remain a learning curve for many would-be millionaires (via Entrepreneur).

Some companies realize that the only way to bring crypto into the mainstream is to educate people. However, the crypto dream is dying because of negative public opinion. It’s not completely unreasonable either because the market is so volatile. This is something that developers must overcome to entice potential customers.

<< Previous

NEXT >>

Crypto Winter

Many seasoned crypto investors think that another winter is coming. Recent weeks saw lots of buyers panic and sell their coins at a reduced rate. However, braver people are holding onto their investments because they think they will rise again. There are no guarantees but it may be the best course of action (via U Today).

Ethereum’s co-founder advised inexperienced buyers to invest in ‘simple stuff.’ He also said to avoid individual hotshots with a big crypto dream because they rarely work. They’re increasingly becoming nightmares for buyers because of the current volatility. It feels like a long time since Bitcoin was going to close all banks.

<< Previous

NEXT >>

No Mainstream Appeal

Crypto dream proponents won’t admit this but the project has no mainstream appeal. The reality is that ordinary people want to use systems that make their life easier. Crypto doesn’t offer anything that they can’t do already with Apple Pay or Venmo. Yes, it decentralizes their savings from a regulated institution but this mostly benefits criminals.

It’s wild that most Crypto developers don’t understand that ordinary people want to save their money in banks. That’s because if the bank goes bust, it’ll face legal consequences. Ironically, crypto’s decentralized nature is the main reason why regular folks don’t trust it (via TechCentral).

<< Previous

NEXT >>

FTX Crash

The FTX Crash is every casual crypto investor’s worst nightmare because it shows that nothing in this digital world is safe. FTX made it easy for traders to hold and deal in crypto. But now everybody sees what happens when it goes wrong. Sam Bankman-Fried’s $32 billion empire collapsed like a souffle.

This has a serious effect on established cryptocurrencies including Bitcoin. It may also lead to increased regulation and government oversight. Many crypto developers dreaded this moment because it defies their ethos. But that’s the consequence of one of the worst financial oversights ever (via The Guardian).

<< Previous

NEXT >>

No Insurance

Cryptocurrencies boast that they are not subject to the same regulations as regular banks. However, there is a potentially dangerous side-effect because they don’t have the same insurance either. If a standard financial institution suffers bankruptcy, customers can secure some of their savings.

They won’t get everything back but it’s better than losing everything. Unfortunately, the latter is the reality for many investors when their crypto dream falls apart. As more of these horror stories arose, more people became wary about investing in cryptocurrencies. That’s not a surprise (via CNet).

<< Previous

NEXT >>

Ongoing Conflict

Russia’s invasion of Ukraine has had a harrowing effect on crypto markets because inflation rose. Ironically, as cryptocurrencies become increasingly mainstream they move with regular markets. This is not something that developers foresaw when they tried to create an independent digital world.

They thought that their creations would be immune from the outside world but that’s not the case. Europe is in turmoil because of the ongoing conflict with a severe cost of living crisis. This is influencing investors and also affecting the value of the cryptocurrencies because people aren’t buying (via Time).

<< Previous

NEXT >>

Increased Regulation

We’ll talk more about ‘The Merge’ later but it’s already having multiple effects on the crypto dream. The Securities and Exchange Commission warned that the new Ethereum is classifiable as a security. This places it under the committee’s jurisdiction and means that there could be more regulation.

Crypto investors because they don’t want the government anywhere near their money. That’s why this is poison to their ears. However, it’s likely that the longer that these currencies exist the more attention they’ll attract. Regulations are coming whether these creators like it or not (via The Conversation).

<< Previous

NEXT >>

Risky Investment

The reality is that most cryptocurrencies are risky investments. The likes of Bitcoin and Ethereum are indeed relatively stable but they still suffer sharp fluctuations. It’s difficult to make massive profits from these established currencies because everybody knows about them.

Everybody’s crypto dream is about finding a smaller project that’s about to break through. But this is extremely challenging and most of them don’t go anywhere. It’s also a struggle for people to make big profits from a small investment. Realistically, most people won’t achieve massive riches from their investments (via Forbes).

<< Previous

NEXT >>

The Merge

One of the biggest reasons why the crypto dream is crashing was The Merge. Ironically, this was Ethereum’s solution to the environmental cost of the PoW system. Now they require users to stake their ether on the blockchain before processing transactions. This is revolutionary for a couple of reasons but one of them isn’t positive for investors.

That’s because it affects their profit potential. It also prevents them from making as much money as the previous method. Unsurprisingly, crypto geeks don’t care about saving the plane. They want to maximize the number of zeros on their bank balance. Only time will tell if this works out (via Forbes).

<< Previous