Bitcoin shows that the get-rich-quick dream never dies

Arabnews24.ca:Monday 20 June 2022 07:06 AM: Cryptocurrencies are valuable to the global economy, but too many people mistakenly believe that Bitcoin and its cousins will make them super-rich. Whether it was the lost city of El Dorado in the 16th century, Dutch tulips in the 17th century, Facebook shares during the 2012 initial public offering, or cryptocurrencies today, humans always cling to the myth that there is a high-speed, low-effort route to unimaginable wealth.

Once upon a time, advanced economies like the US allowed their banks to issue their currencies, enabling people to choose their preferred currency for transactions. While such a system has certain disadvantages, it does offer the key benefit of competition-induced discipline.

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As many unfortunate subjects of profligate monetary authorities have discovered throughout the last few thousand years, when a single authority is in charge of the money supply, whether it is King Henry VIII in 16th century England or the Federal Reserve Bank in the 21st century US, there is a risk that the authority will abuse their monopoly by issuing too much currency. Those with limited means usually pay the price literally and figuratively as inflation gouges their living standards.

One of the key potential advantages of cryptocurrencies is that we are no longer beholden to the whims of a malevolent or incompetent central banker. The distributed ledger technology also promises further protections for the average Joe from unsavory governments manipulating the financial system to their end.

We should be happy that cryptocurrencies have emerged for these reasons and others. But these are not the primary motivators for many who recently jumped on the Bitcoin bandwagon.

Instead, their calculus is – without hyperbole – looking at a graph of the value of Bitcoin, noting the significant and rapid increase, and assuming that such a trend is likely to continue. Accordingly, if they get on the train now, it will make them millions of dollars in a matter of months.

Two things separate cryptocurrency from your garden-variety snake oil, helping fuel its insane bubble. First, as explained above, it does bring something genuinely new and valuable to the table and isn’t the total mirage that some would have you believe. Second, it has secured a fantastic slew of celebrity endorsements – including many mainstream stars such as Kim Kardashian, Reese Witherspoon, and Tom Brady.

The result is a great willingness among the masses to ride the cryptocurrency wave. Unfortunately, after flirting with a price of $70,000 in November 2021, Bitcoin has lost almost 75 percent of its value, leaving the finances of many ordinary investors in ruins.

We have all been fooled by the promise of easy money. My personal experience was a game of “which cup has the ball under it” at a popular tourist destination. Like outsiders watching their favorite Hollywood icon make millions on cryptocurrencies, I thought the other people were playing and winning the game. In fact, they turned out to be insiders making money at my expense.

I learned an important lesson that day, which applies to all the financial crazes that have blown through the Gulf countries throughout the last few years, such as flipping houses in the Balkans or timing the cryptocurrency market. If someone is offering you a way of making a lot of money quickly without exerting much effort, it is almost certainly too good to be true.

For such plans to pan out, you either have to break the law (for example, by being an inside trader); or be lucky, which means odds that are scarcely better than a lottery ticket. It might seem unfair, but we must learn to resist the seductive allure of a get-rich-quick scheme.

You might think you have picked up on the opportunity before others, but you probably haven’t. You might think you are smarter than others, but you probably aren’t. How can you tell for sure? A good litmus test is: do you have to work hard to make money? If the answer is “no,” it’s probably a scam.

What about all rich people who don’t have to work hard, like trust fund kids and aristocrats? Well, they are either lucky, breaking the law, or both.

Generally speaking, if you aren’t born rich, there is unlikely to be a low-effort route to becoming one. Even marrying into money is hard work.

So the next time someone offers you a quick and easy way of making millions, your best bet is to heed the words of Founding Father Thomas Jefferson: “I’m a greater believer in luck, and I find the harder I work, the more I have of it.”

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