The £1 trillion crypto crash proves greedy investors never learn

According to the old saying, a fool and his money will soon part ways. After their cryptocurrency investments fell further into worthlessness, once smug cryptocurrency punters have learned a painful lesson.

Over the centuries, investors who are greedy have suffered great losses due to investment bubbles. In 17th-century Holland, “Tulipmania” saw bulbs rise in value to the point that they were worth more than homes before reality hit.

Not only fools throw their savings away in pursuit of quick money. Sir Isaac Newton lost as much as £40m to the South Sea Bubble in the 1700s.

According to the greater fool theory, asset prices rise only because a “greater fool”, is willing to purchase them. The market eventually sees the light and leaves the greatest fool with nothing.

In just one month, more than £1 trillion was wiped from the cryptocurrency market’s value. From its April peak of £48,000, Bitcoin’s flagship cryptocurrency is now below £17,000 a coin.

Fear of missing out is what fuels bubbles. Much of the hype surrounding crypto was created by social media and online forums. The greater the amount of money that floods into a currency, the higher its value becomes.

Investors are now using the same forums to share numbers for help with people who have lost everything.

This month’s collapse shows how vulnerable we are to pyramid schemes. Regulating basic human greed will not stop it. Investors who are now suffering from losses must take responsibility.

There has never been a legitimate get-rich-quick investment. The value of any cryptocurrency is a fallacy. Smart investors are able to make money by taking a risk before the more ignorant investors.

It is no accident that cryptocurrency peaked during the pandemic when people had enough savings to spare.

Bitcoin and other cryptocurrencies were described as “digital gold” that could be used to hedge against inflation. Crypto has been tested and it has proven to be almost worthless.

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