“Missed the last moon? With our token, there’s always another moon coming” – or something to that tune you may read on a flashy website promising you fortunes. Seriously, why not take a chance?
As a matter of fact, many tried, most failed, only a select few made it. Let’s find out who those select ones were.
Not All Risks are Born Equal
The higher the risk the higher the potential reward is a well-known mantra going among investors of all sorts and stripes, crypto space included. To appreciate the balance of the risk and reward of an investment, we use the risk-reward ratio which compares the potential profit of the investment with the potential loss it may cause.
In more practical terms, this metric shows the profit you may get for every dollar you may lose. Easily the best investment across the entire crypto landscape in terms of risk-reward ratio has always been and still remains the crown jewel of the cryptoverse – Bitcoin itself.
You may beg to differ, of course, and you are absolutely entitled to disagree, but keep in mind that Bitcoin was worth next to nothing when it had started out in early 2009 and right now it is priced over $60,000 – far beyond what any other crypto has ever achieved or will achieve in the foreseeable future.
Then, it’s also the least common denominator as far as the investment risks in the space are concerned. If some cryptocurrency kicked the bucket tomorrow, Bitcoin would go on as usual and completely unabated. In fact, that would only add to its popularity as a risk-free asset. However, if Bitcoin itself departed all of a sudden, such a tragic outcome would unleash total chaos throughout the neighborhood.
Furthermore, both risks and rewards are inherently personal. And it’s not just the profits growing your bottom line and warming your heart that are personal or the losses emptying your wallet and making you sick that are painfully personal too.
Even more importantly, it’s the subjective nature of risks and rewards as they reflect your understanding of the asset and its market. The less you know about an asset, the riskier it will be for you to invest in it (we will get back to that shortly). Put another way, the same asset at the same time may mean to another investor markedly different levels of risks and rewards – a different risk-reward ratio, by extension.
And that takes us to the next part of our narrative.
No Rest for the Wicked
Today, we can openly admit that Bitcoin came with a stunning risk-reward ratio. The risks of the top crypto are virtually non-existent while its rewards continue to accumulate. For what it’s worth, it is the ultimate x1000 coin you could find – given you were lucky to get in early and stick with it for long enough. Alright, that’s the genius of hindsight at work, the power of the rearview mirror.
But what’s the opposite of that? What has risks infinite and rewards infinitesimal? You could argue that any scam coin fits this definition quite well. When such a coin eventually bites the dust, you are left with nothing. However, there’s typically a brief window of opportunity to make dough even with a scam coin (or at least break even). Dump it at the right time and you have beaten the crowd:
This is where the personal aspect of risks and rewards comes into play. When investing in a coin or token, you believe or are led to believe in a certain risk-reward ratio associated with that particular investment. Really, you wouldn’t want to invest in a project if you knew in advance that there was no way you could possibly earn money from it, right?
And that’s exactly what happened with the Squid Game token that has been making headlines recently. The unfortunate investors in this project were promised price stability through an anti-dumping mechanism. This mechanism essentially consisted in a restriction to sell. Consequently, it was impossible to exit the project once you had invested in it: But investors missed or ignored the writing on the wall because they only saw the price shooting through the roof (and fancied their pockets lined with cash). Obviously, if no one was able to sell, the price couldn’t but rise further until the con artists running this scam operation decided to pull the rug. Then the token instantly crashed from over $2,800 to zero:
You don’t need to be a Warren Buffett to understand that the hapless Squid Game investor was doomed right at the outset, no matter what risks and rewards he considered in his head – if only for the lack of understanding the “asset”. On the other hand, the scam operators didn’t take any such risks while their rewards were only limited by the greed of the investing crowd. In other words, the scammers knew exactly what they were selling to the public.
For them, the risk-reward ratio was very attractive, indeed.
Once Bitten, Twice Shy
Squid Game’s infernal debacle is important because it sheds light on why we don’t see many x1000 coins these days. The explanation is simple. The only way you could get that much growth today is by preventing the investors from leaving the project too early (and taking home some profits) – provided you succeed at harnessing their irresistible urge to make huge returns within the shortest amount of time possible, in the first place.
However, many cryptocurrency investors had already burned their fingers with these get-rich-quick schemes in the past and would rather prefer a bird in the hand than two in the bush. And that means sticking with Bitcoin as a baseline investment policy.
This is another powerful lesson that the Squid Game scam teaches us all.