And I mean LITERALLY explain like I’m 5, I literally know nothing of the technical terms and such
In: Economics
So you know how a currency really only has value if people think it has value? Imagine if a bunch of people tried to make their own currency and were doing their best to convince everyone that their currency was the best one and that it should be the one that everyone uses, not the crummy old dollar. Obviously, not every currency is going to be adopted. Some will be successful and others will fall into obscurity if they don’t do a good enough job at convincing people that they are valuable. Now imagine some stock traders looking at this whole fiasco, and realizing that they could essentially bet on which currencies were going to work and which wouldn’t to make money. If you think a currency is going to work out, then you buy a lot of it and wait for everyone else to realize how valuable it is and then sell yours once it’s in super high demand and the price of it soars. Now let’s say there’s a currency that you know is worthless, how do you make money off of that? By buying a bunch of it and then tricking a whole lot of people into thinking it’s valuable so that they buy a lot of it in the hopes that it will jump in price. Now there is a lot of demand and you have a big supply, so you sell all of your currency to someone who is convinced that the price will soar and so they are willing to give you double what you paid for it.
Latest Answers