Cryptocurrency

Cryptocurrency: an asset whose value is determined exclusively by speculation

29 May 2025 admin1998 7 min de lecture
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Summary

  1. Introduction to Cryptocurrency and Its Main Characteristics
  2. The Foundations of a Cryptocurrency’s Value: Utility versus Speculation
  3. A Voluntary or Involuntary Decentralized Currency
  4. The Risks Associated with Cryptocurrency Investments
  5. Extreme Volatility and Its Consequences
  6. Historical Examples of Speculative Bubbles
  7. Outlook and Limitations for 2025
  8. Frequently Asked Questions About Cryptocurrency
Discover the world of cryptocurrencies: understand how they work, explore the different investment options, and stay informed about the latest trends in digital markets.

Introduction to Cryptocurrency and Its Main Characteristics

Since their emergence with the success of Bitcoin in 2009, cryptocurrencies have sparked a global craze. These digital assets are distinguished by their decentralized nature, their blockchain technology, and their ability to conduct transactions without an intermediary. Unlike traditional currencies issued by governments, they are not dependent on any central institution, which contributes to their innovative nature but also to their complexity. Their operation relies on a network of computer nodes that validate each transaction, thus ensuring security and transparency. These cryptocurrencies are not limited to Bitcoin: binance/">Ethereum, Ripple, Litecoin, Cardano, Polkadot, Chainlink, Binance Coin, Dogecoin, and Solana are among the most popular and innovative.

According to a study by the French Ministry of Economy, they are often considered alternative assets, somewhere between money, securities, and commodities. Their primary role, however, remains central: to provide a means of transaction, a store of value, or a speculative asset.

https://www.youtube.com/watch?v=Q3PNQK-WpF0The Foundations of a Cryptocurrency’s Value: Utility versus SpeculationThe value of a cryptocurrency generally lies in two main criteria: its practical utility and its ability to attract investors through speculative movements. In 2025, this duality is even more pronounced, with the majority of assets whose value is essentially dictated by speculative demand.

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According to traditional logic, a currency derives its value from its ability to serve as a unit of account, a means of exchange, or a store of value. However, in the case of cryptocurrencies, this utility is often limited by their lack of universal acceptance. For example, Ethereum has use cases in smart contracts and decentralized finance, but their use remains marginal given their volatility.

Buyers are generally motivated by the fear of missing out on a quick profit opportunity. The spectacular rise of Bitcoin last winter is a good illustration of this, attracting investors seeking capital gains rather than using Bitcoin as a transaction currency. Criterion

Usefulness

Speculation

Definition

Concrete use for transactions or contracts Purchases with the hope of reselling at a higher price Examples
Ethereum for smart contracts Bitcoin, Dogecoin for speculation Growth prospects
Limited by adoption Highly volatile, potentially high Risks
Low if use is limited High if demand drops Discover the fascinating world of cryptocurrencies, their advantages, how they work, and how to invest securely in these revolutionary digital assets.
A decentralized currency, voluntary or not Cryptocurrencies claim to be decentralized, which gives them a certain autonomy from governments and central banks. However, this structure raises major questions about their status and stability. In 2025, no cryptocurrency enjoys official currency status in a specific geographic area or sector. The main players in the market, such as Binance Coin or Solana, offer platforms for conducting transactions, but their usefulness remains optional. For example, a merchant can accept Ethereum for payment, but they are not required to do so. The majority of transactions are conducted in fiat (euro, dollar), making their practical use marginal.
This model calls into question their ability to become true reference currencies, unlike the dollar or the euro. Dependence on speculative demand remains their predominant characteristic. Some experts urge caution: their lack of control and extreme volatility make them a risky asset for investors, especially in an uncertain economic environment. Risks Associated with Cryptocurrency Investments

Investing in cryptocurrency carries high risks, including the potential for total or partial loss of the investment. The main threat lies in the high volatility of these assets, which can lead to fluctuations of several tens of percent in a matter of hours. If an uninformed investor buys a token like Dogecoin or Litecoin at a time when their value is artificially inflated, they could easily suffer a sharp decline.

For example, in 2024, Ethereum experienced a decline of more than 60% due to regulatory tensions or hacker attacks. The weakness of their regulatory framework in many countries amplifies their risk. Added to this are security risks, with the hacking of exchange platforms or digital wallets, as was the case in 2023 with several significant losses.

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Another threat lies in the creation of new cryptocurrencies or speculation on dubious projects. Some assets, such as certain tokens from the Polkadot or Chainlink blockchains, may prove unsuccessful, leaving their holders with worthless assets. Risks of total loss (theoretical or actual)

Extreme and unpredictable volatility

Risks of hacking and fraud

Market manipulation and regulatory failure

Fraudulent or short-lived projects

  • Extreme volatility and its consequences
  • A characteristic that almost always defines the cryptocurrency market is its increased volatility, which can lead to spectacular fluctuations in a very short period of time. The value of Bitcoin, Ethereum, or even Ripple can double or halve in a matter of days, or even hours.
  • This phenomenon is due in part to speculation, but also to the lack of clear regulation, sensitivity to regulatory announcements, and technological news. In 2025, this volatility has not diminished, reinforcing the idea that these assets lack a solid floor of value. The consequences are multiple:
  • For investors: risk of rapid losses, constant need to monitor the markets
  • For companies: difficulty integrating these assets into their financial strategies
For financial stability: potential crisis if a sudden correction causes widespread panic

Effects of Volatility

Concrete Examples

Rapid Drops in Value

Ethereum in 2024, Losing 70% in One Week

  • Sudden Increase
  • Dogecoin Explodes by +150% in 48 Hours in 2023
  • Impact on Investors
Panic Selling and Significant Losses Discover the world of cryptocurrencies: their principles, advantages, and how to invest. Stay informed about the latest trends and opportunities in the digital world.
Historical Examples of Speculative Bubbles The collective psychology surrounding speculative assets is nothing new. One of the most famous examples remains the “tulip mania” of 17th-century Amsterdam, which saw the price of tulips explode before a sudden collapse. Some economists consider this the first example of a financial bubble.
This phenomenon is characterized by rapid price growth driven by speculative demand, followed by a sudden collapse when confidence disappears. This pattern has been observed in several modern bubbles, including the Bitcoin bubble in 2017 and the bubble of certain tokens in 2021. As a reminder, during the tulip mania, some bulbs sold for more than a house. But once confidence collapsed, they were worthless, confirming that a speculative asset without intrinsic value is doomed to collapse at the slightest crisis of confidence.
Outlook and Limits for 2025 As we approach 2025, several factors indicate that cryptocurrencies will continue to grow, particularly in sectors such as decentralized finance and asset tokenization. However, their future remains uncertain due to their intrinsic characteristics.
A significant limitation lies in their lack of fundamental value, which makes them vulnerable to sudden corrections. Heavy speculation and short-term investor interest weigh heavily on their price, which is often disconnected from any tangible economic reality.

While some countries are already experimenting with regulations to regulate these assets, their adoption as official currencies or means of payment is not imminent. These tokens will likely remain highly volatile investment instruments, like Bitcoin or Solana, whose value can fluctuate rapidly based on market trends and global events.

Limited adoption by economic actors

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Underdeveloped regulatory documentation remains unreliable

Lack of ability to stabilize value over the long term

Possibility of new major bubbles or crashes

Frequently asked questions about cryptocurrency

Does cryptocurrency have a floor value?

Generally no. Its value is based primarily on speculative demand, without any solid economic foundation, which can lead to a drop to zero in the event of a major panic.

  • What are the main risks of investing in these assets?
  • Extreme volatility, total loss, hacking, fraudulent projects, lack of clear regulation, etc. Will cryptocurrencies one day become benchmark currencies?
  • It is unlikely they will become so without official government recognition or strong regulation, as their decentralization is incompatible with this traditional function.
  • Do cryptocurrencies have intrinsic value?

Most have none. Their value is purely speculative, fueled by short-term supply and demand.

How can you protect yourself against total loss?
There are no guarantees. Diversification and vigilance remain the best methods, but zero risk does not exist in this world.
Source:
www.lerevenu.com

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