By Andrea Carolina Vargas Malagón, Journalist at UdeA Communications Office
More than a decade has passed since the emergence of the first cryptocurrency—Bitcoin—and the official launch of its network. Although hundreds of these digital currencies exist today, many questions remain: How secure are they? How do they actually work? Could they affect the traditional economy? An economist from the Universidad de Antioquia and a crypto-asset expert help clarify these concerns.
On May 20, 2025, the Colombian House of Representatives passed the first reading of Bill 510 of 2024, aiming to strengthen and expand the country’s cryptoasset industry. Photo: Communications Office, UdeA / Andrea Vargas
In early 2025, Argentine President Javier Milei drew global attention by endorsing a new cryptocurrency project called $Libra. The initiative ultimately turned out to be a classic “rug pull”—a common scam in the crypto world (see box). Although he isn’t the first national leader to back a failed crypto initiative, these incidents highlight a deeper issue: the lack of financial education around digital assets and the economic risks of entering this space without proper knowledge.
Exit Scam
A “rug pull” is a well-known scam in the cryptocurrency world. In this scheme, developers launch a new digital asset and aggressively promote it, often promising quick and substantial returns. Once investors buy in and the value rises, the developers suddenly withdraw all the funds, leaving behind a worthless cryptocurrency and significant losses for those who invested.
When most people hear “cryptocurrencies,” they immediately think of digital money. Yet money has been digital for quite some time, since the introduction of debit and credit cards. Santiago Márquez, a computer engineer, and author of several works on Bitcoin and blockchain, explains it clearly: “Today, we can consider all the money in the world as digital. The vast majority of the global money supply—trillions of euros, pesos, or dollars—doesn’t exist as physical banknotes. Instead, it exists as records stored in computer systems.”
Cryptocurrencies differ from fiat currencies—such as the peso, dollar, or euro—because their value doesn’t rely on government backing. They operate through decentralized networks, unlike fiat money, which is controlled by governments and financial institutions.
Fiat money depends on the currency issuance authority of each country’s central bank. In contrast, cryptocurrencies emerge through a decentralized process called mining, which operates on secure blockchain technology.
Types of Cryptoassets
Cryptoassets cover all digital assets built on cryptographic and blockchain technology. Although every cryptocurrency is a cryptoasset, the reverse isn’t true. Cryptoassets also include tokens—digital units of value usable only within some digital platforms—and stablecoins, which are cryptocurrencies tied to fiat currencies, typically maintaining a one-to-one value ratio with them.
“Blockchain employs security protocols that secure transactions by connecting each new entry to the one before it. This process creates a sequential record, generating a unique code that traces the origin and destination of every transaction, even tracking where the cryptocurrency first entered the chain,” explained César Augusto Giraldo, a finance and capital markets expert and professor at the Faculty of Economics, Universidad de Antioquia.
Think of the blockchain as a massive ledger that logs every cryptocurrency transaction. The records remain permanent, open for anyone to view, and are stored simultaneously across numerous locations.
Blockchain links transactions to alphanumeric addresses instead of real names, so records remain pseudonymous. These addresses don’t reveal personal information by themselves, but platforms with KYC (know your customer) procedures—such as exchanges—can link them to user identities. This connection allows analytical tools to track fund movements and associate them with specific individuals.
Relationship with the Economy
Cryptocurrencies reduce transaction costs and simplify commercial activities. They also deliver greater speed and efficiency compared to traditional banking, making them a compelling financial alternative. Still, a cryptocurrency’s value depends on several factors: supply and demand, scarcity, speculation, and most importantly, its degree of decentralization and market trust.
“Bitcoin’s monetary supply was capped at 21 million coins when it launched in 2008, making it a scarce asset. Unlike national currencies, which central banks can expand or contract through monetary policies—either injecting money to boost the economy or withdrawing it to control inflation—no one can create more Bitcoin beyond that fixed limit. As more people acquire Bitcoin, its scarcity grows, which can drive up its value over time,” explained César Giraldo.
“When we consider Bitcoin, we realize that, over time, it has steadily embodied Satoshi’s original vision as a store of value. Being a genuinely deflationary currency, each unit appreciates, making its strength inherent to the currency itself rather than relying on regulatory authorities,” added Santiago Márquez.
Márquez explains that no central authority controls Bitcoin’s price; instead, market supply and demand determine it. However, demand can change based on government regulations, technological advancements, adoption by major financial institutions, and shifts in user confidence. People often describe Bitcoin as a “deflationary” asset because its supply is limited and many expect its value to rise over time, but this view involves speculation. In practice, Bitcoin exhibits high volatility: it can undergo prolonged bull markets but also face sharp drops when interest wanes or spikes. Thus, relying on scarcity to ensure ongoing price growth is a market gamble, not a guaranteed economic outcome.
On May 22, 2025, one bitcoin (BTC) nearly hit 464 million Colombian pesos, breaking the $100,000 barrier, according to coinbase.com.
Speculation refers to the expectation about an asset’s future value, such as cryptocurrencies in this case. When investors anticipate that a cryptocurrency’s value will rise, they increase their purchases, boosting demand. Since supply is limited, this higher demand tends to push the value up. If a cryptocurrency loses credibility or support, demand falls, causing oversupply and a decline in its value.
“When we speculate, we aim to make the most of our economy. That’s what it’s really about—maximizing returns from limited resources. I don’t believe speculation is inherently negative. But in the world of cryptocurrencies, we need to recognize that some projects have a much stronger foundation than others,” said Santiago Márquez.
Speculation often brings volatility—the extent and speed at which a financial asset’s price fluctuates over time. While this can offer quick profit opportunities for short-term investors, it undermines the use of cryptocurrencies as a means of payment. Their price fluctuations make it hard to establish stable prices or create dependable financial plans.
“One major criticism of cryptocurrencies is their extreme volatility, driven by their scarcity. But that scarcity also increases their appeal to investors. For example, someone might buy Bitcoin at $85,000 and see it rise to over $100,000 by year’s end. The greater the volatility, the higher the risk—and, in turn, the higher the potential return,” explained César Giraldo.
Now that we understand what drives a cryptocurrency’s value and how it operates in the market, how does it influence the traditional economy?
Cryptocurrencies promote financial inclusion by offering services to people who lack access to traditional banking. They empower individuals to manage their funds securely without intermediaries. And they also recommend a way to diversify investment portfolios. However, their unregulated nature creates challenges for national economies, including weakened control over monetary policy, decreased tax revenue, and economic instability driven by high volatility.
“Governments rely on tax revenue to fund public services and drive economic growth. When cryptocurrencies, which operate outside the traditional financial system and evade government oversight, gain popularity as a trusted means of trade, many transactions escape taxation. As a result, the state loses vital revenue, which limits its capacity to reinvest in the economy,” explained César Giraldo.
Giraldo also cautioned that regulatory frameworks remain under development and differ significantly across countries. El Salvador allows the legal use of Bitcoin, whereas China has enforced strict restrictions. This uneven landscape complicates efforts to ensure the interoperability and stability of global financial markets.
How to Invest
Start with a small amount, invest only what you can afford to lose, and spread your money across different crypto assets instead of putting it all into one. The higher the risk, the more cautious you should be with your investment size. These tips originate from Professor César Giraldo and Bitcoin expert Santiago Márquez for those new to the cryptocurrency market.
“Investing in cryptocurrencies can be rewarding, but it’s crucial to understand where you hold your assets. When you keep them on an exchange, the exchange controls your account. If the exchange shuts down, you risk losing your investment. On the other hand, storing your digital currencies in a personal virtual wallet gives you full control, and no one can take them away,” explained César Giraldo.
Both experts emphasize that the first step before investing is to research thoroughly—know who backs the cryptocurrency project and be confident in its solidity. It helps reduce the risk of falling prey to a “rug pull” scam or investing in coins that won’t yield returns. Simply put, it’s wiser to invest in cryptocurrencies that are already well-known.
“If you’re looking to invest, just buy Bitcoin. Keep it simple, hold onto it for the long term, and that’s all there is to it,” Santiago Márquez said.
