China has yet again issued another warning on the so-called dangers that go with investing in the cryptocurrency industry. This time, the warning came in the form of a news report by its state run TV channel.
The report titled ‘Blockchain Cryptocurrency Bubble Accumulates’ claims to be an investigative piece exploring how dangerous crypto speculation can be.
The seemingly extensive report focuses on one bitcoin investor who has been on a losing streak even before the ICO ban was implemented in China. The investor, named Yang Chao, allegedly lost millions of yuan from bitcoin betting. The report said:
“In actuality, this isn’t the first time that Yang Chao has speculated on coins. Prior to the banning of ICO’s and cryptocurrency trading platforms, his losses already exceeded two million yuan. Yang Chao feels that the ICO ban launched by the central bank has not had any effect whatsoever on investors like himself.”
The report only highlights the fact that Yang has been making poor financial decisions for quite some time now. However, we must assume that he has been following the old saying that ‘you should only invest as much as you can afford to lose’. Obviously, he has been an “investor” for quite a while now, which means he has obviously been following this advice, right?
JUMPING ON THE BITCOIN BANDWAGON TOO QUICKLY
The report added:
In the less than ten years since their emergence, the price [of Bitcoins] has exceeded 120,000 yuan. Given such a mad increase, the allure of becoming rich overnight has attracted a large volume of investors.
This right here points us to the problem. Ill-informed investors, or those who are still new to the world of crypto trading, are putting all their eggs in one basket in hoping to become instant millionaires without taking into account the market’s volatility.
DO YOUR HOMEWORK!
The report continues by saying:
Because countries lack effective regulation, capital can use the game of rising and falling prices to readily make off with the funds of small investors. These types of operations are easy to do on the current market where there is a large volume of new cryptocurrency issues. The lack of openness, the lack of transparency, the instability of prices, as well as the expectation amongst investors that they will become rich overnight, has magnified risk on the virtual currency market.
First of all, decentralization is all about transparency and openness. Next, unpredictability of prices is nothing new—platforms such as CoinMarketCap are in place to show the highs and lows that virtual currency pricing experience.
The issue, therefore, does not lie in cryptocurrencies at all. It is with investors who look at bitcoin and other cryptocurrencies as a way to get rich quickly, instead of doing research, applying due diligence and using common sense before jumping into the bandwagon and parting with their hard-earned money.