Stock Trading – Entry 13

I took a couple hours one day to do a quick review and go hunting for some stocks. Since I am buying to hold, I always sleep on it, but something happened before I went to bed that same day. I was zipping through social media and found a video ad featuring the social media tycoon, Mark Zuckerberg.

I stopped scrolling as I quickly noticed it was actually an ad for a blockchain. It didn't take long for me to see a lot of similarities between that and the scam I got suckered into in entry 6 of my stock trading journey. Newsflash #8: Just because it's a new year doesn't mean markets don't have the same problems. Invest at least $300 via credit card or e-transfer, watch your money grow, telephone call to set you up.... The guy doesn't even own that blockchain any more!!

Alas, I am getting ahead of myself, so I will simply say that I started with some good ol' Internet research as a savvy investor. Here's the short version of what I found.

In entry 7, I wrote about the importance of knowing the use case of a blockchain. The use case for the Libra blockchain started off as interesting. According to this article (written way back in 2019), Libra was to create a way to enable zero-cost currency exchange fees for everyone. The basis would be a bunch of currencies held in reserve so I could just buy the blockchain, do the transaction, and the other person could cash out on their end. What's more, all of that money in all of those currencies used to back Libra would be sitting there earning interest, so holders of Libra blockchains could also make some dividend-style cash on the side. One of the other things that initially made this blockchain a serious contender was the fact that a number of large financial companies (e.g. credit cards) were supposedly behind it according to this article.

Why did many governments balk at Libra? According to this other article, there were reasons other than money laundering and terrorist financing. Countries whose currencies were not being held to back Libra could have their currencies gutted, I mean, there is economic fallout to being economically left out!! In addition, it is centralized. Among other things, this means the creators/managers of Libra can see who is buying what at all times. Not exactly Robin Hood, now is it?

Knowing what everyone actually buys and for how much with a vague promise to eventually decentralize (which would make transactions private)...it is way too valuable for a corporate entity to have that knowledge than part with it. What makes things even more interesting is, those hands can change. Yup, according to this article, Libra was sold in early 2022 only to be written off one year later according to this other article! (In fact, the blockchain itself was also called Diem.)

So, like the gold-backed blockchains I wrote about in entry #11, the big question is where are all those currencies coming from that are being used to back Libra? Well, governments didn't buy into it. Soooooo...that leaves it up to a lot of individuals in a number of countries to put their cash into the system. Me with Canadian dollars. Someone else with USD. Someone else with Euros. Get that to happen several thousand times with each person putting up 300 of their home currency and, poof, there is the backing.

Ok, let's take a look at whether or not this is Magic or People Power:

1. it is centralized - the one corporate entity behind it has all of the power
2. it is backed (by multiple currencies) - the one corporate entity behind it gets to manage lots of money and profit from that management as much or as little as they want
3. no/low exchange rate fees - which can change at any moment given the above two items
4. it has been officially written off - meaning its use case is purely hype now
5. crowdsource funding - the average Joe/Joanne assumes the vast majority of the risk

Is it any surprise now why I became exasperated upon learning of this so-called opportunity that is now the equivalent of a scam in my opinion?!? Then there is the fact that the initial purchase goes into someone else's digital wallet! Like I said in entry 6, if it isn't your own digital wallet, then you have given it away. As a result, I passed on this.

To find out what REAL opportunities I have looked at and delved into in 2024, subscribe for free below so you can read future articles of my stock trading journey.

On a side note, the online search tool I have been using is Ecosia. You get great, fast search results where the boatload of snooping is replaced by trees getting planted. Update your search provider to Ecosia via the settings on your browser (simple guide for many browers in this article).