Circular systems are the new pyramid systems -

... or how you can lose a lot of money in crypto currencies.

This is my first little article on steemit. I'm going to write about something I heard today from a crypto expert.

Have you ever heard of circular systems? With these systems, you lose the money you invested in cryptographic currencies.

Imagine someone inventing a coin. He hires this coin on different platforms and starts to advertise this coin via social media. He engages successful influencers - e. g. youtuber, bloggers - who report on the coin in a benevolent way.

More and more people are getting on board. The coin is in increasing demand. The price goes up. It's getting pumped up. The coin inventor gets out at a certain point in time, sells his coins at a higher price and leaves many small investors alone.

Eventually the first investors realize that the coin can't do anything. The first ones sell their coins again. The price goes down. The dump begins. They sell below the price they paid and make losses.

Why can such systems be called circular systems? The coin inventor is the center of the system. His direct partners around him get in very early and get out very early. Here you have the smallest loss or minimum profit. The further you are from the center, the more you lose.

Basically, they are something like Ponzi systems or pyramid systems. The system only works if all parties win new partners. If this stops, the system will collapse like a house of cards.

So, be careful with your money and invest only in coin systems whose business model you understand. Check who issued the coin and whether it is traded on official exchanges.

I myself have gained a lot of experience in the online, crypto and network marketing business. I like to share these experiences with you so that you don't make the same mistakes I did.

Have a wonderful time until my next post.

Stefan Bösebeck, management consultant from Germany