Cryptocurrency might be booming these days, but people should still be wary of how its value really works, according to European Central Bank (ECB) president Christine Lagarde.
Lagarde, in fact, even goes on to say that cryptocurrency isn't "real" currency, advising people to treat them as "suspicious" and "highly speculative," reports Forbes.
These pronouncements were made in a Bloomberg podcast in the midst of growing interest in smaller cryptocurrencies, such as dogecoin, Ripple XRP, Binance BNB, and solana.
According to Lagarde, cryptocurrency is a highly speculative asset that only "claims" its fame as actual currency, but it simply isn't.
Despite these remarks, however, Lagarde did go on to praise stablecoins. This type of cryptocurrency is tied to real-world assets and even traditional currencies, alongside so-called central bank digital currencies or CBDCs.
According to Lagarde, these cryptos are far different and require regulation that corresponds to the business they're conducting.
But of course, Lagarde's comments about cryptocurrency aren't really slowing down the increase in their overall value. The total value of all cryptocurrencies in the world (including popular ones such as bitcoin and ethereum) already stands at an insane $2.48 trillion, according to Bloomberg.
Considering that this value was less than $1 trillion at the beginning of 2021, it's an absolutely gargantuan jump.
Some nations are even already mulling the full acceptance of cryptocurrency as legal tender, with El Salvador's bitcoin acceptance having officially begun this month.
This made the cryptocurrency the country's official currency alongside the US dollar, which is unprecedented for modern times.
Cryptocurrency And Its Well-Known Volatility
ECB president Christine Lagarde didn't make those comments without reason behind it.
If there's something you should know before partaking in the cryptocurrency market, it's how unpredictable it can really get. Compared to traditional currency, there really is not much of a comparison.
Cryptocurrency values will skyrocket one day, then drop back down to earth the very next. And that's because the entire market thrives only on speculation, according to NDTV.
It gets most of its value from investors betting that prices will rise or fall, in order to make profit.
It Also Poses Risks To The Environment
Cryptocurrency mining operations have been getting shut down in several countries because they consume way too much power. Some crypto, such as Bitcoin are even producing enough e-waste every transaction to rival the output of entire countries, such as the Netherlands.
In a world that's been increasingly adopting environment-friendly energy sources, this is bad news.
Unless cryptocurrency can find a way to minimize its carbon footprint, there's not much else to go for it.
If you're investing in cryptocurrency right now, then that's good. You're reaping the rewards based on current market conditions.
But if you want your life savings to be safe, do not put all of your eggs in that one basket. Diversify: that's the one secret that will get you into the top 1% of earners.
This article is owned by Tech Times
Written by RJ Pierce