Is Dogecoin Really a Safe Investment?
Dogecoin has grown nearly 23,000% in the last year. To understand whether Dogecoin is a safe investment, it helps to understand why cryptocurrency was even created in the first place, starting with Bitcoin.
Understanding the initial ethos behind the crypto movement and what solutions it seeks to provide our society with are questions one should understand before investing in any crypto asset. If you’re interested in pure speculation and taking a risk, then Dogecoin may be for you, but if you want to understand the real purpose behind the movement, you may want to consider alternatives.
Bitcoin: A Way to Opt-Out of the Banking Infrastructure
Bitcoin came about during the fallout of the 2008 financial collapse, and while other attempts at digital money and e-cash had been made before, its story largely begins there.
In 2008, retirement accounts were flushed away as banks took on exceptionally large amounts of risk through the use of mortgage-backed securities and rehypothecation of collateral, building an unsustainable house of cards.
As it became clear that banks did not have enough cash to handle their bets going sour, the positive sentiment in the market evaporated. People began panic-selling their portfolios. Those who were nearing their retirement years and did not have the time to wait around for an economic recovery lost decades’ worth of saved up retirement money.
It became evident that something or someone had to stop the slide and board up the sinking ship. But how? The narrative started to surround the banks and their alleged “too big to fail” nature. The unfortunate reality is that this was true. The economy had been built up with straw and the bank’s practice of derivatives of derivatives tumbled like dominoes until the straw house collapsed. If any more banks were to fail the global economy would surely continue free-falling.
The solution? Government intervention in an otherwise capitalist and free-market economy. The band-aid that would stop the economy’s bleeding was to bail out the banks with taxpayer money. In other words, the citizens paid the price for the bad decisions that these banks made.
According to a review of the bailouts that occurred in the United States by Deborah J. Lucas, an MIT Sloan distinguished professor of finance, those who benefited from the bailouts were the institutions, rather than the citizens.
“As for who directly benefitted, Lucas found that the main winners were the large, unsecured creditors of large financial institutions. While their exact identities have not been made public, most are likely to have been large institutional investors such as banks, pension and mutual funds, insurance companies, and sovereigns.”
The value and purchasing power of the dollar has since been diminished due to the excess pumped into the market with this type of quantitative easing, especially since the recent stimulus in wake of the pandemic.
M2 Money Stock
While the drastic…
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