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Where is my money going when I buy a crypto? - Crypto

In this Blockchain interview questions , I have collected the most frequently asked questions by interviewers. These questions are collected after consulting with top industry experts in the field of Blockchain & related technologies.


Asked On2022-01-09 07:48:45 by:Akhil-Dev-D

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Let’s treat cryptocurrency as a normal stock,trading in an exchange…What factor makes the prices of the stock go up and down?There’s just one- Demand & Supply. If a stock is in Demand that is the number of people with positive sentiments (interested in buying) is more than the number of people with negative sentiments(interested in selling) so obviously you always wanna sell high so the sellers start increasing the price and because demand is high the prices continuously get filled and are raised even more . Imagine the opposite that is the number of sellers increase than the number of buyers now the sellers start decreasing the prices in order to sell their shares quickly as the prices are falling ,as the sellers are competing to sell their assets first this causes the prices to decrease even more and ultimately there is panic in the market and this can cause the value to decrease rapidly (Who wants to loose money,That’s why everyone starts selling) A stock may take 100 days to go from 10$ to 100$ but can come down to 1$ in one day the fall is always harder than the rise as no one wants to loose money.

Now Coming to Cryptocurrencies the price is completely driven by demand,More Demand=More Valuation……NO DEMAND=NO VALUE.

Now coming to The Very fundamental flaw in cryptocurrencies. It Has NO Intrinsic Value! If A stock goes to 1$ or below the company has physical assets which can be liquidated and capital recovery is possible to an extent a currency has gold if cryptocurrencies go down you are left with Nothing.

One more thing…There is no such thing as “Unhackable” if your virtual currency in a virtual wallet gets stolen or worse the wallet shuts down all your money is gone. Banks are regulated and are guarantors of your money if your money gets stolen they pay you back…Wallets don’t do that .

Another Problem(Volatility)- As international currencies are regulated they are very stable only movement of a few cents here and there in one day. Imagine getting paid in Bitcoin when it was 20000$ you get paid a months salary and suddenly in a few weeks you see it’s new valuation is only 10000$ one day you have 20K another day you have 10k. You see decentralization on such a huge scale makes the market very volatile panic can come at any time and valuation may even go down to a few cents.

It is a known fact that in the stock market 90% people loose money…..this is the “crowd”…crowds always loose…so a very simple but useful suggestion…. stay away from the crowd …. either do the opposite or don’t invest… it may not be a bubble but what if you buy near the top you can still loose half of your capital on a 50% downmove and to recover the same capital the stock would have to go up by 100%!

The problem is everyone wants to make that quick buck…People don’t know what they are getting into,for an investment to perform you have to research in the fundamentals and believe in them so that you can be patient and hold it even when there is selling pressure.

Imagine someone has 1 million bitcoins and he starts selling…prices would start falling rapidly there will be panic in the market the novice investors would start selling too this will cause a domino effect and BAM! All gone. Earning Nothing is always better than loosing everything.


Answerd on:2022-02-13 Answerd By:Raj-Gupta

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