Crypto is a rigged game you won’t win | Opinion

Right when you thought you were free from the onslaught of talk about cryptocurrency and non-fungible tokens, I come in with another article on the subject, but dont fret. Unlike some of my previous articles, this one will be about the economics of this space instead of the technology.

To begin, I want to jump right into the sales pitch often given by people invested in NFTs to those who are on the fence. Please note how I phrased that too. Oftentimes, NFTs are pitched with the same lofty ambitions and upsides that Ive discussed and rebuked in previous articles.

However, alongside all of this is a recurring theme. If you buy in now, then whatever you invest could be worth thousands more in the future. Pictures of early Bitcoin investors whove since cashed out and enjoy lavish lifestyles have flooded the internet, and if you want to be that person, then you need to invest now.

At this point, its important to bring back up an important point I made in my last article; to mention NFTs is to mention cryptocurrencies.

By getting people invested in NFTs, digital art, and other blockchain-based media, early investors can kill two birds with one stone. They can both 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 worthless if no one is willing to invest. As a result, you can only cash out 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 cash out.

The correlation between the rise in demand of NFTs and cryptocurrency cash outs is so strong that you can see when big-time crypto investors began to turn their holdings into cash by looking at Ethereums stock price in the middle of May 2021 plummet following NFTs media attention around the same time.

Altogether, as alluded to earlier, this sounds like a pyramid scheme, and yes, youd be correct. The early investors rely on getting the people they know, a number that has increased exponentially through the internet, to buy in, and these people hope to get more people invested.

This pattern reveals that cryptocurrency is inherently a zero-sum game, a product of the greater fool theory, which requires that someone is willing to resell an asset at an overvalued price by convincing an even bigger fool that its worth even more than it actually is. Backed by both the finance and technology worlds as a system too complex for the layman to understand, blockchain, cryptocurrency, and NFTs are being peddled as something far more idealistic than it really is, a broken system from top to bottom utilized by scammers to make way more than just a quick buck.

At some point, there will be losers.

The total quantity of dollars earned from investing will equal the quantity of dollars lost from investing, and given the high buy-in rate and demographics of the current wave of newcomers, the number of people on the loss side will outnumber the number of winners.

This is the zero-sum game of crypto, and unless you can convince someone to be a greater fool, then youre one of the losers, meaning that your biggest incentive as an investor is to bring in more adopters.

But this just sounds like the stock market? This may sound true in principle, but in reality, there are several differences.

The only one I really care to mention is that stocks are driven by a tangible entity whose profitability is reliant not on the number of people who buy-in but the success of the goods and/or services they provide.

The best that cryptocurrencies have to offer are NFTs and the other blockchain-based media, whose value truly comes from the vapid upsides of the blockchain itself.

Heres where we get to the true empty promises provided by the whole system. For cryptocurrency to be viable, it relies on NFTs, but their niche properties dont provide enough for any nuanced investor to see it as valuable.

As a result, many NFT peddlers have tried other ways to get their product and I use that term loosely to sell, namely by creating a community and making a series of claims in the hope that it appeals to their demographic of choice.

While the nature of these communities is what will be discussed in detail in my next and final article on cryptocurrency, I want to discuss the claims made by these communities right now.

Generally speaking, most of the copy and paste art collection NFTs that have circled the internet in recent months have communities attached to them, validated by their claim as being projects worth investing in rather than pieces of digital art genuinely worth collecting.

In other words, if you were to buy a Bored Ape NFT, you would be buying a form of stock in the community and its projects, a pseudo-business of sorts. To maintain this validity, they make promises that the community will work towards projects such as comic books, video games, or a literal casino in the case of the Betting Kongs NFT.

Will these promises be met? Of course not.

These communities are not real businesses. They are all individualized zero-sum games that dont have the connections, capital, or organization to function as a real business.

People who buy-in are trapped into the equivalent of a shotty crowdfunding scam. Then, when a rug pull allows the owner to sell their holdings, make thousands, and disappear into the night, buyers have a worthless product that might be, like in the recent Squid Game inspired crypto scam, literally unsellable because of the technology behind the coin.

In other scams using a pump and dump strategy, many people might be recruited and organized to help pump value into the cryptocurrency only for the corresponding dump to never come at the point they were promised, causing them to lose money as the value plummets because they werent on the inside.

Hence, residing in Discord servers plagued by bots and scammers, these communities are full of delirious and vulnerable individuals, and theres no one to help them when they turn out to be the greater fool.