While popular TV show host John Oliver admitted that “discussions about any new technology tend to age very poorly” and that “it’s dangerous to make predictions about how technology will evolve », his recent episode addressed the subject of cryptocurrencyparticularly bitcointhe largest digital currency in the world by market capitalization.
Oliver, the host of HBO’s “Last Week Tonight,” warned viewers against “gambling” with cryptocurrency, saying the concept included “everything you don’t understand about money combined with everything you don’t understand about computers.
He began describing bitcoin’s volatility last year, during which its value exploded from $1,000 to $9,000 in late November to nearly $20,000 a month later. Oliver joked that Bitcoin exploded so much that paparazzi started asking celebrities nuanced questions about it. He suggested that bitcoin has value for the same reason that everything has value: because people agree that it does. Right now, there’s a Beanie Baby going for $15,000 on Etsy, because the owner thinks it’s worth that amount, Oliver noted.
The TV host spoke about the concept of FOMO, or “fear of missing out,” which causes people who otherwise don’t invest to jump into digital currency trading after seeing countless headlines about digital currencies. Others finding wealth quick and easy, often at a young age. Although bitcoin has fallen almost 50% since the start of this year, Oliver suggested that bitcoin millionaires are still fueling wild enthusiasm and curiosity around the market. Amid such speculative madness, it can be extremely difficult to determine which companies represent the real deal. (See also: Crypto, cannabis and FOMO are generating an influx of new investors.)
“Essentially the Wild West”
Oliver then explained bitcoin as a decentralized digital currency. Inasmuch as Open source computer code, supported by blockchainor distributed ledger technology, no bank or government creates or controls it, which has theoretical advantages such as better efficiency and security.
Regarding the security benefits of blockchain-based technology, the segment highlights a comment from Don Tapscott, co-founder of the Blockchain Research Institute. He suggested that taking apart the blockchain would be like turning a chicken nugget into a living chicken, a metaphor that Oliver thought was “really useful” and “really stupid.”
The prospects of improved safety, efficiency and trust have motivated major companies such as Walmart Inc. (WMT) International Business Machines Corp.IBM) and JPMorgan Chase & Co. (JPM) to all experiment with blockchain as a way to potentially store and share data and transactions simply and reliably, but it’s too early to know what blockchain is capable of, Oliver said.
However, despite its prospects, “the market is basically the Wild West and ripe for exploitation,” Oliver said, noting that companies that simply add “blockchain” to their name have seen their stock prices triple on average. Because anyone can create digital currency, more than 15,000 cryptocurrencies have been launched, Oliver said. Often startups sell a coin to raise funds instead of raising shares, which returns the total amount raised initial coin offerings (ICO) to over $6 billion in 2017. While not all are ventures, many investors buy simply because others are buying and do not respond to the details of the startups they fund.
Even though the market was heavily manipulated by pump and dump schemes, regulators have been slow to act on crypto markets. Ultimately, Oliver concludes that crypto investors are not investors at all but rather gamblers, and that this is acceptable as long as they are aware of the reality. (See also: Bitcoin will stabilize and reach $50,000 by 2019: Neu-Ner.)
Investing in cryptocurrencies and other initial coin offerings (“ICOs”) is very risky and speculative, and this article does not constitute a recommendation by Investopedia or the author to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decision. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the writing of this article, the author owns cryptocurrency.