There have been countless discussions about the manifest risks in trading using cryptocurrencies, which may result from unregulated transactions that are shrouded in ambiguity, manipulation and speculation. To make things worse, there is still an absence of regulations controlling the use of cryptocurrencies.
Just recently, millions of users lost their investments following the unseemly collapse in the price of digital currencies, which have since November shed $1 trillion according to the Wall Street Journal.
This is exactly what many have warned about countless times in the past. Unsurprisingly, these currencies (which have exceeded 5,000 in number) lost more than half of their value during the period, led by the sharp erosion of Bitcoin’s.
Caught in a loss spiral
Despite these warnings, including those made by central banks, the craving for quick and easy profits blinded many and who then ended up losing their savings. Some of them have even entered a cesspool of exhausting loan paybacks for long years to come.
The rush to buy digital currencies, especially by the young, has been fueled by the media, which portrayed such exposures as if they were an ‘Ali Baba’s cave’. Some celebrities took advantage and launched digital currencies under national slogans to draw attention and encourage the unwary to purchase.
Soon after collecting tens of millions by selling ‘fake’ digital currencies, these celebrities vanished. Some even left their day jobs simply because they don’t need them now that they are millionaires. On the other hand, the value of their currencies adds up to zero.
No recourse available
Since digital currencies are not subject to any regulations, losers have stood idly by with no central banks, financial institutions or courts to resort to claim their rights. They are the unwitting victims to scams and can do nothing about it. Yet, the mindful ones have avoided losses and preserved their savings from getting wasted.
Indeed, this has been a tough lesson for many and what we have seen so far is nothing but one round in the cryptocurrency market. There will be more – new Krypton are expected to join in, and even the old Krypton may come back one more time under the influence of the media and temptations by promoting ‘experiences’ of those supposedly making fortunes with such transactions.
Don’t need more Krypton fiascos
New Krypton gurus will emerge to launch their digital currencies under different names to achieve quick and fat profits.
This phenomenon constitutes an economic and social menace that must be addressed with special legislation and hold the perpetrators to account. Even though, many of these crypto creators remain in shadows.
This means promoting public awareness as the most effective weapon to preserve investments of individuals. Any sudden erosion or disappearance of these funds will definitely cause local economies to lose resources that can be better utilised.
Some groups can bear losses thanks to the sizable wealth they have. However, the vast majority will witness a downgrade to their way of living due to the loss of their savings. This will create a social burden that may generate undesirable repercussions.
Therefore, all old and new Krypton followers will have to rethink between choosing feasible and guaranteed investment methods through which returns can be made or wait for next crypto upturn. Promising investments are available in various countries, especially in the GCC, which have the regulations that protect investors.
Mohammed Al Asoomi
The writer is a specialist in energy and Gulf economic affairs.