And I mean LITERALLY explain like I’m 5, I literally know nothing of the technical terms and such
In: Economics
It’s a pyramid scheme.
Yes, crypto bros, that’s all it is.
When it starts out there is no demand for it (no one knows what it is), so the price is low. People who buy in them get a low price.
As time goes on the hype starts to build. Demand grows, and more people want it. But the supply is kept small. The result is the price jumps up. So the people who bought it at a low price can now sell at a higher price.
People see those people making money, want in on it, so the demand grows even further. But the supply is kept small, so the price continues to rise. This repeats itself several times.
The whole market is based on new people “investing” in it. So owners are heavily incentived to hype the market and get more people to join.
Problem is the human population is finite. So the total market for demand is capped. Eventually there stops being new people willing to invest. Just like the last people to participate in the chain letter sent their dollar to the sender but don’t have anyone sending them anything back, the last buyers of the crypto asset are stuck with something they paid a lot for but no one is willing to buy at a comparable price.
In the end no wealth was produced. It was only shifted from the late adopters to the early adopters.
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