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The Difference Between Crypto And A Dollar, Euro, Yen, Etc.

Folks who are considering an investment in cryptocurrency will often ask me about something they've been told by a promoter, which is that crypto is exactly the same as a dollar or any other government-issued currency (known as "fiat currency") in that a dollar bill [i]per se[/i] has little practical use, unless you're looking for something quick upon which to write down a phone number or something, but instead is simply a unit of exchange.
In an abstract sense, that is true. A unit of cryptocurrency is simply a [i]unit of exchange [/i]which has value only because the public gives it value, and that has been true whether it is electronic currency (crypto), little bits of paper (dollars, Euros, yen, etc.), or as in our past, beaver pelts and pretty seashells. Leaving aside the beaver pelts, which in the aggregate can keep you nicely warm, all the things that we have historically used as units of exchange have themselves almost nominal value that in modern times are indistinguishable in value from the numbered and (theoretically) protected electronic units that we call cryptocurrency.
But we don't live in an abstract world, and instead live in a very real one where the differences between crypto and the little pieces of paper are light-years apart.
That difference is that governmental currency, such as dollars, are given the nation's support to reduce volatility, prevent manipulation, and maintain a steady price. Crypto has no such support.

Today In: Money  
All the major governmental currencies, whether the dollar or whatnot, are supported by each nation's Central Bank (in the U.S., called the Federal Reserve Bank) which sets monetary policy, including the money supply, so that inflation is minimalized and the prices for goods and services are kept relatively stable. Certainly, conditions and prices change, but these tend to be at a relatively slow and predictable pace: That German sports-sedan you want which is selling at $50,000 now, will probably be selling at $50,000 next summer too -- maybe a tad more, but not enough to write home about.
In addition, each nation can protect their own currencies through the use of the criminal laws if somebody attempts to manipulate their currencies (or by trade sanctions if another country attempts to do so). Attempts to counterfeit the currency and other currency frauds are dealt with by law enforcement, and occasionally new forms of bills are issued to deter counterfeiting.
The point is that each major currency does not exist in a vacuum, set on the seas of finance without support like some bottle with a note in it cast upon the ocean. Instead, each currency is vigorously and actively supported by the Central Banks and numerous agencies of each nation. This is why major currencies are not highly volatile and do not suffer from widespread price manipulation or other serious problems. Businesses that deal in major currencies can realistically expect their value to be maintained consistently over the short-term, and generally over the long-term.

Not all governmental currencies are either well-supported or anything like stable; the Venezuelan bolivar comes to mind here. Such countries with failed governments and failed economies simply do not have the financial power to protect their currencies, and so the value falls to nothing. In this sense, they are roughly equivalent to crypto.
Crypto is in fact a worse unit of exchange than even the currencies of failed nations, because a cryptocurrency doesn't have anybody even making an attempt at price support or preventing manipulation. This is why crypto has wild swings in value -- horrendous volatility -- and thus utterly fails as that "store of value" that it's promoters speak so much about. While "nobody regulates crypto" may sound cool to some in a libertarian sense, in a very real economic sense that spells disaster, and did.
Today, crypto has become little more than a giant playground for pumping-and-dumping by coordinated price manipulators. How will the crypto industry deal with that? It can't, because crypto isn't regulated and nothing prevents price manipulation. There is utterly nothing the crypto world can do to stop manipulation. It is simply a fatal flaw in the entire idea of private crypto that is inherently incapable of being fixed. [If a major government were to convert its own physical currency to crypto, which may in fact someday happen, that would be very different because then the government could support it like its currency now.]
So why did crypto grow into a multi-billion industry? The answer is found in one word: Hype. Very simply, venture capitalists needed [i]something[/i] to throw their money at and hope that it skyrocketed (which it did for a very short while), not too differently than a run-of-the-mill pyramid scheme. Other folks needed to make money off the venture capitalists by offering supporting technologies for which they had a plausible-sounding story that the business might take off and make investors a bunch of dough. Put these two things together and pretty much [i]anything[/i] can suddenly show a multi-billion dollar marketing capitalization, which is exactly what happened with crypto.
Which is to say that crypto has grown in value and created its own surrounding industry purely on hype, and without crypto have any practical use (much less an economical practical use) whatsoever. Very simply, even aside from the crazy price volatility which make crypto utterly useless for the vast majority of businesses -- including those who throw up a "Bitcoin Accepted Here!" sticker because it looks cool -- there really is nothing that crypto can do which isn't accomplished much more price-efficiently and usually faster by existing financial mechanisms such as credit cards and wire-transfers.
This is why, as crypto prices have dramatically fallen from their December 2018 highs, the primary uses of crypto seem to be returning to their core, namely the Four Horsemen of money laundering, pornography, speculation, and keeping money secret by the prepper and survivalist crowds. With the exception of the latter, who can't seem to have any good luck in building wealth, those who use crypto for the first three things don't mind the volatility -- and so crypto can be expected to linger on at some greatly-reduced basis just to fill these needs, [i]i.e[/i]., all crypto is eventually going to return to its value as dictated by fundamental analysis, which is zero, but it will not quite get to zero because of the dark money uses and speculation.
We may to live with the Hype for some time, however, because even bad industries die hard and in the meantime those who promote crypto will be looking for new investors to fleece. This again brings up the lamentable fact that the U.S. Securities & Exchange Commission and similar regulators worldwide have done a really awful job in regulating the security that is crypto, allowing millions of investors to take big losses on something that was never more than glorified fluff, and (just like with Madoff and Credit Default Swaps) only showing up long after the horse had left the barn.
On the other hand, it is difficult to have too much sympathy for the vast majority of crypto investors who sunk money into something that they utterly did not understand, other than a lottery-like hope that they could get rich and quickly.
But as the Romans said: [i]Caveat Emptor[/i]. Or as Dr. John Bridges said in 1587, "A fool and his money are soon parted." Or my own favorite expression: No investment that you don't fully understand is likely to be a good one.
All of which would apply to the vast majority of former crypto owners today.
[b]Looking Back to 2018 Bitcoin Predictions[/b]
Speaking of fools, compare Bitcoin's price ending the year of 2018 -- about [b]3,700[/b] on this December 26, 2018, with the year-end 2018 predictions of these alleged experts made at the start of 2018:

$100,000 said Kay Van-Peterson at Saxo Bank in this article, who was only 2,700% wrong.

Dave Chapman from Octagon Strategy also thought that Bitcoin could hit $100,000 in 2018 in this article, and who was also 2,700% wrong.
Julian Hosp of TenX said that Bitcoin would hit the $60,000 mark, but in his defense also thought it would hit $5,000, in this article.
Jeet Singh, a crypto portfolio manager, thought that Bitcoin could go to $50,000 in this article, meaning that he was only 1,350% off.
In this article, John McAfee is quoted as saying that Bitcoin would be worth ten times as much in 2018 (at a time when it was trading around $13,500). That would be a prediction of $135,000 meaning that McAfee was off by over 3,600%.
Meanwhile, Fundstrat's Tom Lee predicted that Bitcoin would hit $25,000 by the end of 2018 in this article.
What the problem with certain analysts making predictions about Bitcoin's price? The answer is that many analysts were invested, directly or indirectly, in Bitcoin. The case could be made that certain predictions were not based on anything of substance, but rather the folks who made wild predictions were trying to shill the price up, [i]i.e.,[/i] they were engaging in somewhat blatant market manipulation.
That alone should make folks very nervous about investing in crypto.