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The Ethereum co-founder issued a warning to cryptocurrency investors, fearing too many new investors are learning the wrong lessons from wealthy flash cryptocurrency enthusiasts. "The danger is that you have these $3 million monkeys and it becomes a different kind of gambling," Vitalik Buterin said in an interview with TIME, referring to the skyrocketing value and flashy excesses associated with bored Ape Yacht Club's NFT community.
If you're one of those people who wants to buy Bitcoin or other cryptocurrencies as a way to get rich quick, think again. Cryptocurrencies are much riskier than conventional investments because of its unpredictability and volatility. That's why investment experts say it's important for cryptocurrency investors to clarify their goals and expectations before buying and complying with the 5% rule – that is, don't contribute more than 5% of your portfolio to risky assets like cryptocurrencies.
As one of the most influential people in cryptocurrencies, Buterin has been following the network he created that is growing with mixed emotions. While Ethereum is designed to restructure the web and enable more application possibilities, from fairer voting systems or Peer-to-Peer lending and lending, the Russian-born Canadian admits his vision for Ethereum has become vulnerable to human greed.
Buterin said: "Digital currencies themselves have a lot of potential threats if implemented incorrectly." It has emerged as a means of tax evasion, fraud and widespread fraud. It has led to the brazen display of huge wealth, especially for the white men who dominate the field, thus creating the public's perception that owning cryptocurrencies will make you rich quickly. And inequality has crept into the ecosystem, including a noticeable lack of gender and racial diversity.
But despite everything, Buterin remains optimistic. Above all, the founder of the world's leading Defi platform says he wants Ethereum to challenge the notion of centralized governments and break Silicon Valley's hold on people's digital lives.
"If we don't show our voice, the only things that are built are the things that can be immediately profitable. And those things are often far from what's really best for the world."
Things to consider before buying cryptocurrencies
Ask yourself "why."
If you're thinking of investing in digital currencies, start by assessing your situation and what you want to achieve. Learn the point of view on cryptocurrencies: Are you approaching it from a long-term or short-term perspective? With cryptocurrencies, you shouldn't go looking for money easily quickly.
If you're in a good place financially, focus on building your knowledge of cryptocurrencies and a good understanding of what you're investing in before you buy. Proponents who see the long-term value of cryptocurrencies point out that blockchain technology has the potential to drive innovation in conventional finance and other industries.
Think about your risk tolerance
Cryptocurrencies are a highly speculative, highly volatile asset class. With such a fledgling market (at least compared to the stock market), the value of different cryptocurrencies can rise and fall and there is no guarantee that they will not collapse completely. So you need to be able to take high risks to buy or invest in cryptocurrencies.
If you're in it long-term, then you don't need to worry about short-term fluctuations.
Decide what kind of cryptocurrency you want to buy
There are over 10,000 different cryptocurrencies, so you'll want to do a lot of research on one currency before placing a money. Always keep in mind the #1 rule when buying altcoins: DYOR – Do Your Own Research!
Whatever the case, experts say you should only invest what you're willing to lose.
