The dark side of cryptocurrencies

Although the mirrors shine, they are not gold, be careful who tries to use them as if they were valuable…

Macro

A few days ago, the international financial market faced one of the most complicated situations in recent years, the bankruptcy of the company FTX dedicated to the exchange of cryptocurrencies and based in the Bahamas, this situation was compared by many analysts as something similar to what happened in 2009 with the bankruptcy of the Lehman Brothers bank, or to what happened to the large energy company Enron in 2000, due to the great influence it has on the market and the great repercussions that followed this announcement .

In this regard, and according to information from the US authorities, the bankruptcy of this company was the result of a lack of liquidity that could not be covered, because a large amount of the funds they had were used to finance a subsidiary in which carrying out high-risk transactions, which ultimately led to the company not being able to withstand the pressures of the market and having to enter a commercial bankruptcy process, it is estimated that practically 75% of investors in cryptocurrencies have had a loss derived from this situation.

The foregoing becomes relevant due to different situations, first, there is a long-standing discussion about the possibility of cryptocurrencies being used as money in commercial transactions, a situation that is not viable due to what is described in the previous lines, a mismanagement at the business level has caused an imbalance in that market, which has led to the loss of a large amount of money to the holders of these instruments and second, as just described, cryptocurrencies are financial instruments that are traded in exchange of money, therefore, their use could not be the same, rather, they would have to be used as means of exchange, as is the case with other instruments such as bonds or company shares.

Otherwise, we would be in a very rare scenario in which money (cryptocurrencies), backed by money (dollars, euros, pesos, etc.), would be worth what market supply and demand indicate, that is, today You, my dear reader, could have less or more than yesterday, regardless of the economic situation at that time, which leads me to ask, would you be willing to lose money just for speculation? Of course, there will be those who tell me that The same thing happens when we talk about the government, which, due to mismanagement and speculation, causes economic crises, however, these crises are fought through economic policy instruments that practically prevent money from continuing to lose value, but, in the In the case of cryptocurrencies, the value depends on the supply and demand in the market, which means that a policy cannot be established to avoid the loss of value, in a good Christian, there is no way to ensure that there is stability in that s instruments.

Given the above, even though there are many who assure that cryptocurrencies are much safer than money, which can be counterfeited, it must be remembered that although it is true that the instrument is practically impossible to hack, the platforms on which it is they carry out the transactions are not, only in 2022 according to information from the US authority, a hack to the Silk Road platform culminated in the theft of 3,000 million euros in cryptocurrencies.

Like any financial instrument, the use of cryptocurrencies is subject to the level of risk of investors, which indicates that there may be a great future as an investment method, but not, like money, trying otherwise can only lead to failure. scenario that nobody wants to witness and to show, everything that has happened in just a few days.

*The author is an academic at the School of Government and Economics of the Universidad Panamericana, speaker, expert consultant on economic, financial and government issues, founding director of the site El Comentario del Día and host of the program Voces Universitarias.

Twitter: @Lopez_Eduardo