He says it’s another one of those speculative bubbles that often burst.
Massachussetts Secretary of the Commonwealth William Galvin issued a warning against investing in virtual currencies. In the release, Galvin’s office lists seven points, stating reminders about the tendency of virtual currencies to fluctuate in value, possibly leaving investors with massive losses. It also includes some precautionary measures advising that investors do a background check on sellers, ending the note with a phone number through which citizens can call to check on the legitimacy of sellers.
The warning likens Bitcoin and cryptocurrencies to other big bubbles throughout history. “Bitcoin is just the latest in a history of speculative bubbles that most often burst, leaving the average investors with a worthless product,” the post said. “Going back to the 1600s with tulip mania to the present Bitcoin craze, chasing the next best thing will, more often than not, end in disaster for the average investor.”
Galvin’s points aren’t exactly without merit. There has been a flood of new cryptocurrency “experts” made up of people who recently came across the cryptocurrency trade and are quick to entice others to buy in on the hype. Or worse—people who have been trading for a long time yet do not take the time to really understand the technology. The secretary urges interested investors to take a moment and weigh the risks before jumping all in.
“If you don’t understand it, don’t invest it. It’s that simple. And since most people won’t understand it, that will apply to most people. It’s just not a good idea,” Galvin said.
Having no central authority and independence from governments and central banks has its perks, but it also has a downside: because cryptocurrencies are not backed by any territory’s economy, it can collapse as easily as it rose—unless it succeeds in establishing and maintaining its own economy. Although blockchains are highly resistant to hacks, exchanges, on the other hand, have suffered massively expensive heists at the cost of users throughout the years.