While I believe Cryptocurrencies are worth investing in the short-term, I suspect that they will ultimately fail in the long-term due to catastrophic loss of the electric grid they rely on.
Today I’m answering the question, “Why will Cryptocurrencies ultimately fail.” Just to be clear I don’t necessarily think they will fail, I just think that they probably will.
I should probably give a description of what Cryptocurrencies are for those who are perhaps not very familiar with it.
If you’ve heard of Bitcoin, that is a cryptocurrency. There are also many other cryptocurrencies that behave in different ways. Just so you understand a little bit more clearly, bitcoin is a currency which exists on a network of computers, except there’s no one controlling what computers are on the network. So you could put your computer on this network and by being a node on the network you would have basically all of the bank accounts (you could think of them like bank accounts, though people call them wallets) listed for all accounts and how much bitcoin is in all of them.
So there are tons of computers that all have this record of what accounts have what money and these accounts are accessed by whatever person has the password to that account. When you make an account with Bitcoin, which you can make as many as you want, you get an account name and you get a private password which unlocks that account and lets you do anything you want with it. It’s like a bank account except that you have total control over it, and it’s also “anonymous”. There are some reasons why it’s not really anonymous, but if you use it carefully it can be.
In summary, Bitcoin is basically a currency that runs on a network of computers and because of that it’s actually very strong and difficult to manipulate or destroy. It would be very difficult to wipe it out since what you would have to shut down the entire internet and also all records of that any computers are keeping the records, or at least a large percentage of them.
The reason I think Bitcoin and cryptocurrencies are likely going to fail is because it is almost a guaranteed situation given enough time. For example my understanding is that the Sun has a storm every so often and when it hits the Earth it’s strong enough to wipe out our entire electrical system. We’d lose a lot of things not just our Bitcoin, but if that were to happen then these things that we may be pumping all of our wealth into are going to be instantly gone.
The estimates I’ve heard are that the chances of this happening are 10% every 10 years, so that’s basically guaranteed to happen for sure within a person’s lifetime and it could happen at anytime.
Cryptocurrencies are also susceptible to wartime situations, especially on a worldwide scale. If people are exploding nuclear weapons miles above a city or a center of people it creates an EMP and wipes out the electrical system. So if that were something that was going on in a lot of different places cryptocurrencies would would go down and they would be gone forever.
I also suspect that there are people who want cryptocurrencies to become mainstream for a period of time so that people get used to them, and to allow us to shift away from these fiat currencies that are basically failing now, and transition to this system which has a lot of freedoms in it which we will enjoy for a small period of time and then once everyone’s comfortable with it and society is used to it then wipe out the system.
The military is the only one who would survive an EMP type situation either from the Sun or nuclear weapons. Therefor the government will be the ones who reinvigorates and recreates the internet, and there’s lots of problems about that, but one of them is that they will also control the new currency which is created, and it will be the only one and there will be no competition.
I do think that we will have several decades, probably one to three, where cryptocurrencies are really the main things that everybody is using, and so I actually do advocate people get into cryptocurrencies right now. That’s why I do videos on like games that you can play to earn cryptocurrency, crypto gaming I call it, because I think it is a good idea in the short term. You just need to understand the larger scale situation and not be silly about it by putting everything that you own into it.
I would say if you’re looking to invest in things which are not going to lose value, then invest in things which are fundamental to reality, for example gold and silver. These are elements which you cannot destroy, and they are valuable for intrinsic reasons. We understand why silver is valuable, it’s extremely useful in electronics and as an antibiotic. We don’t quite remember why gold is valuable but I think we will soon rediscover why it is crazy valuable and why societies traditionally have hoarded it and used it as the store of value for so long.
Again, I do recommend investing in and using cryptocurrencies, but I wouldn’t put all of my wealth in that basket. Diversify and get some things you know for certain will maintain their value. It’ll give you a huge leg up if the situation I described above comes to pass.