Hey guys, it's sasha. Over the last few months, we've seen an explosion in interest in cryptocurrencies. Bitcoin went from dipping below four thousand dollars in march 2020 to reaching over 63 000 in april 2021 as the price skyrocketed. The interest in bitcoin re-emerged as well as it did with other cryptocurrencies as well, which tend to take their lead from bitcoin over the last few days.

Bitcoin and other cryptocurrency prices have crashed with bitcoin trading at between thirty two thousand thirty seven thousand dollars over the last 24 hours. A lot of people out there are actively encouraging people to buy the dip. The prices are so cheap that you can get double or triple, or even more cryptocurrency for your money, but before you go splashing your lifetime savings, let me tell you why you should think carefully before you do so now. Before i get into the detail, i am not here to spread fud.

I am not here to say that i hate crypto. In fact it's the opposite. I am a mathematician and i absolutely love the concept and the theory behind it and the practical applications that i think it could have. In fact, over a decade ago, i set up mining rigs in my house, mining bitcoin, but that's a whole different story.

There are some really important things that you need to be aware of, because, aside from the naturally high volatility and the naturally high risk that cryptocurrency has, there are a lot of really really big problems. First, let's talk about the outright scams, the decentralized nature of cryptocurrency and the relative simplicity of it mean that it is very easy, incredibly easy to go and set up or launch a new token or a new crypto, and so, along with some really interesting new innovations. New types of chains, new chains that include smart contracts and other really good, crypto stuff, the scammers have turned up as well as they do everywhere, where there is an opportunity to make money. The problem is that it can be incredibly difficult to tell the scammers from the rest until it's too late.

There are three most common ways in which these scammers operate. The first is the traditional rock ball. This is a scenario where the person who creates the crypto collects a huge amount of that crypto early on before anyone else has it and before anyone has heard of it, either for free or by paying a nominal low amount to themselves in order to buy it Through a fair distribution, now some of the newer cryptocurrency tokens also include liquidity pools, and these can suffer from the same issue in a slightly different way, because the owners and the creators of the crypto will have access to those. So then, after marketing, the crypto and aggressively promoting it, the price of that crypto will rise and when the moment is right, the person who owns that huge amount of it will go and sell it for a huge profit.

This either results in the price collapsing to a point of no return or the liquidity pool is used up, which prevents other holders from physically being able to actually sell in some cases, both of those happen. At the same time, these rock balls happen almost daily. Just in the last week, we've had d5 100 shiba and even the famous water and rugs personality who actively on social media, spoke out against rug, pools, doing a big rug, pull on their own fair moon, crypto. There's a slightly less obvious variant of this, which is called a soft rug pool.

This is where the owner will slowly sell smaller amounts off their crypto over time, so that nobody actually notices it happening. Usually, in this case, the owner will spread their crypto ownership between a large number of different wallets, because then it's completely impossible to tell that they're actually doing it now. Another scam method that is gaining momentum at the moment in the crypto sphere is traditional. Old-School ponzi schemes: this is a way of designing the actual crypto designing the actual code that says behind it, so that old holders are rewarded and profit directly from new holders who are buying.

In now the longer you hold, the more your earnings will grow, except this scheme relies on a constant flow of new people, new investors to be coming in, because the moment that that flow slows below a critical level, the ponzi scheme can unravel really quickly because all The existing holders will stop growing their earnings at the fast rate that they used to, and people will begin selling off and that can create a really sharp drop all the way down to zero. Perhaps the most common way that crypto investors lose their money, though, is much simpler than both of those just a plain old pump and dump scheme. Now, in one of these, you will go and invest in something because you have heard it promoted and you've heard lots of investors shout about how rich they become, how much they've made so far, including possibly some people that you actually know. This is all part of the pump.

The pump builds up a huge amount of hype in something to attract a lot of new investors, quickly, drive the price upwards and, as the price reaches an all-time high, the owners of the bulk of it. The people who created in the first place will go and sell and at that point the price collapses and that's what you call the dump, and this is a traditional scenario which can happen alongside the others that i've mentioned or instead it doesn't really matter. Another huge issue with crypto is the fact that it's still in a relatively infantile state, although crypto has been around for 12 years, which is a long time, its use cases have still not really fully developed. I mean sure i can go to some of those coffee shops in shoreditch and go and buy my coffee using bitcoin, but in terms of genuine real-life problems and that need real-life solutions that are specifically addressed by crypto.

That is fundamentally better than the other options that we have with using traditional financial services products we're not really seeing those emerge just yet, just as a reminder. The first iphone came out just before bitcoin did and that changed our lives with an infinite number of solutions to an infinite number of problems that modern smartphones bring. So there's definitely a huge issue in my mind and in my personal opinion, in fact, that we're still sort of trying to figure out exactly what the actual problems that we're trying to solve using crypto are we're trying to kind of tailor things to using crypto. Where perhaps there isn't necessarily a need to use crypto and other traditional normal methods of exchanging value work perfectly fine, because the problems, if the problems that we had were genuinely really big and really need extremely fast, urgent solutions, because the existing set of solutions we had Were just not good enough, crypto will probably have had enough time over those 12 years to adopt a very different kind of adoption curve.

Anyway. That brings me to one really important aspect that needs to be addressed, and that is the emotional side of crypto investing, because crypto continues to be relatively unregulated almost entirely in most countries it has developed some quite unpleasant traits as a result. Aside from the outright scams i mentioned earlier, anyone can go and invest in crypto. You can be absolutely of any age.

There is no minimum requirement, you can live anywhere. There are no protections, there is no monitoring there is nobody have providing any kind of oversight as to what's actually happening behind the doors, and this has done a few things. The first is: we've seen a huge distortion in people's understanding of core financial principles and how money and investing actually works in real life. Making 10 returns per year is actually seen as incredibly bad by this whole new segment of potentially in some cases younger crypto investors.

If you're not making thousands of percent in terms of gains per year, or maybe even per month, then you're apparently losing out according to this new mantra. And for those of us who have been around the block a bit and perhaps understand the world of investment and finance a little bit more, this rings huge alarm bells. It has also developed a tribe-like mentality, a lot of investors. In the latest token, the latest crypto will become very unhealthily obsessed with it.

They will go and source out every single thing that talks about it, they'll be in communities on an almost 24-hour day basis, talking about it and sort of egging each other on and hyping. Each other up with rocket emojis and phrases that are surprisingly common, like when a lambo which, roughly translates to when will my 50 investment become 300 000 and, on the other side of the coin, excuse the unintended fund. Anyone who dares to question or say anything negative about that particular investment will be branded as a hater who is spreading fud. A large group of these investors will come at the person with varying levels of hate, but just because they are making commentary, there will be a lot of childish, name, calling swearing quite a lot of pretty bad obscenities thrown about, and this will range all the way Through into concentrated efforts to literally destroy their career, to destroy their youtube channel or whatever else, media that they're using to communicate, there'll, be threats of violence, threats of death and the rest of it.

And i know because that's what i got for daring to raise. My head above the parapet and literally just voice my views about some particular topics. That is the world in which we now live in which this new form of investment operates. So the issue is that the vast majority of these crypto investments operate on you literally investing in hype.

There is no problem that the coin or token actually solve your perpetually fed information which says that at some point in the future, there will be these groundbreaking developments that are going to completely revolutionize the world and revolutionize everything because they are coming, and you just need To hold your investment and tell more people to go and invest as well, so that the price rises over time. In most cases, the thing that you're investing in is almost certainly not even in any way unique. The vast majority of these coins are just a copy of the code of another coin. Within some cases, maybe just one or two variables changed very so slightly.

Will there actually be use cases and good reasons to use them in the future? Maybe, but i can tell you for sure that 99.9 of these thousands upon thousands of new coins that are entering the market won't unfortunately make it to that future, because there simply isn't that much space for all of those to coexist and to be used. For the same purpose, and so if you're deciding whether to buy the dip on your favorite crypto, just make sure you take some time to think through your decision before you go and make you.