And I mean LITERALLY explain like I’m 5, I literally know nothing of the technical terms and such
In: Economics
1. Speculation (buy low sell high)
2. Derivatives and Futures
3. Yield Farming by allowing other holders to borrow or swap against a pool of tokens you contribute to
Buy low, sell high. Sounds easy, but it isn’t always, generally because fear or greed gets in the way. Buy BTC when everyone says that’s it, its dead and will never pump again – scary time to buy. Sell BTC when everyone says this is the dawn of a new era BTC will hit $1000000 – people get greedy here and hold until it drops below their original buy.
They “cash out” the cryoto eventually
Basically crypto as a currency is almost useless, you can’t go to the store to buy groceries or pay your rent with it
You can however, sell it to someone for real money and the process repeats with the next guy except the next guy tries to sell it at a higher price.
Basically it works like making money from selling anything.
I have always assumed the only real use for crypto, other than buying and selling like a beanie baby, is to use it for money laundering.
Convince someone to buy it from you for more than you paid for it. And then they’ll try the same https://en.m.wikipedia.org/wiki/Greater_fool_theory
You buy a toy for 5 dollars. You (or anything else) convince someone else that it’s really cool and will totally be worth a lot in the future, so buying it from you for 10 dollars is a great deal
You made 5 dollars overall and until it crashes, the next guy might make some money too
Two ways generally
1) Most people making money are making money because buying/selling bitcoin is just like buying and selling shares of a stock of say Apple. Apple goes up because shareholders speculate it has value. In the same way Bitcoin goes up or down based on the fact that the people buying and selling it believe that it has value. Sure apple has a business plan and some financials to back some of their value up… but ultimately a belief doesn’t have to be rational for there to be value there. and so bitcoin has some value based on the number of people who use and hold bitcoin.
2) a whole industry of distributed micro-lending now collectively known as “DeFi” has cropped up, allowing people who hold trusted crypto currencies on certain platforms to lend out some percentage of that value and get a small percentage of interest in return, this is much more boring than stories of people holding crypto for a few years and being able to sell their “stocks with 100x return because of some viral moment on twitter or whatever… but its much closer to how more traditional investments work and is much more understandable.
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.
1. I want to get into crypto
2. I buy a bag for 5$
3. I sell the bag to someone else for 10$
4. They open the bag and find sand worth 0$
This is crypto
Buy low, sell high. That’s literally it. The whole thing is a scam in which people are trying to convince others to buy in to pump the price of it up so they can sell and leave someone else holding the bag.
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