Altcoins and the Death Spiral: A Warning for Investors
Cryptocurrencies have become a popular investment option for many people in recent years, with Bitcoin being the most well-known and valuable one. However, in addition to Bitcoin, there are thousands of other cryptocurrencies, commonly known as “altcoins”, that have been created and marketed to investors.
Death Spiral Convertible Bonds: An Analogy for Altcoin Investments
Unfortunately, many of these altcoins have turned out to be scams, Ponzi schemes, or simply worthless investments. In fact, many of them have behaved exactly like companies that issue death spiral convertible bonds. These bonds are essentially a type of debt that can be converted into stock, but they have a feature that can cause the stock price to drop rapidly, leading to a “death spiral” for the company.
In the case of altcoins, the death spiral occurs when there is a massive amount of selling volume associated with new coins being issued. This selling pressure comes from previous investors who have been issued coins and are now dumping them immediately. This leads to a rapid decline in the value of the coin, making it almost worthless.
Jasmy Coin and the “Bitcoin of Japan” Marketing Scheme
One example of this is Jasmy coin, which was marketed as the “Bitcoin of Japan”. From November 2021 until the present day, there has been a massive amount of selling volume associated with Jasmy coin, leading to a death spiral. It’s very likely that this coin, along with many others, was a Ponzi scheme combined with a pump and dump marketing scheme, making it almost certainly worthless.
Investor Beware: Due Diligence is Key
Investors should be wary of altcoins and do their due diligence before investing in them. While there are some legitimate cryptocurrencies out there, many of them are simply too good to be true and are likely scams or Ponzi schemes.
In conclusion, altcoins have behaved similarly to companies that issue death spiral convertible bonds, with many of them turning out to be worthless investments. Investors should be careful and thoroughly research any altcoin before investing in it, as the risks associated with these investments can be very high.
