CRYPTO'S * CAREENING CORROSION : MASTER ESSAY

Got an idea? Issue a digital coin to fund it - all you need are believers. A financial world where common notions of value don't apply. And it's getting wilder.

When Bitcoin plunged last May, Binance.com the world's biggest cryptocurrency exchange was overwhelmed and began to malfunction.

Fawaz Ahmed, a crypto trader in Toronto, had a big futures position open on Binance's platform, which he built partly with funds borrowed from the exchange. exchange. With prices sinking rapidly, he knew he needed to close it out.

But with Binance not working properly, Mr. Ahmed was unable to sign into his account. When he finally regained access hours later, Binanace had taken possession of all of Mr. Ahmed's holdings to cover the losses from the wrong-way bet.

''I could do nothing but watch my hard-earned money go to zero,'' Mr. Ahmed said. At the time, he estimated his loss at $13 million.

As stocks were sold off early in the past week, crypto prices also plunged. Bitcoin dropped nearly 13 percent before rebounding along with stocks. Ethereum's own coin, Ether, was briefly down 15 percent.

Their prices declines have dragged down other digital asset prices, too. Analysts attribute the decline to investors who are pulling their money out of higher-growth, risky assets - including technology stocks -  as interest rates are set to rise. That has put a dent in the argument, promoted by crypto boosters that digital assets offer a hedge against losses in other markets. 

Despite their volatile and occasionally inscrutable nature, cryptocurrencies are becoming most widely traded, used and held - El Salvador recently started accepting Bitcoin as a legal tender, the U.S. Federal Reserve is studying whether to issue its own digital coin, and wealth managers are encouraging clients to explore crypto assets.

So how does a new investor make sense of crypto and its constantly changing landscape? The short answer : It's impossible.

There are so few reliable measures of value that it's hard to tell whether the excitement around a particular cryptocurrency is justified - or a bubble about to burst.Traditional financial analysis doesn't apply here. Belief alone can drive value.

It's even hard to know what counts as a ''cryptocurrency.'' Bitcoin and Ether are widely regarded as currencies because, like the dollar, they are used to buy and sell many goods and services.

An additional 11,000 or more digital coins and tokens also exist, many of them vying to gain enough acceptance to become the next Bitcoin or Ether.

[Coins operate on their own digital backbones, called blockchains. Tokens rely on other blockchains to get around in cyberspace. The assets are stored in wallets, which are comparable to online bank accounts that their holdings are visible to all.]

By standard measures of value, prices Of Bitcoin and Ether are understandable. They are priced high -with market values on Friday of around $700 billion and $287 billion - because they are well established and liquid, with broad user bases.Bitcoin is held in nearly nine million wallets, according to chainalysis, a data provider.

But there are many other coins and tokens whose prices are skyrocketing, giving them market values above $1 billion even though they have only 100,000 or so users.

The market value of RenBTC, an 18-month old token designed to connect Bitcoin to the Ethereum blockchain, peaked above $1 billion in October and was around $670 million on Friday, but RenBTC was traded among just 1,732 wallets from Nov-20 to Jan.13, according to Chainalysis.

''Bitcoin is used by people all over the world,'' which explains its value, said Maddie Kennedy, a Chainalysis spokeswoman. But coins with plenty of activity by relatively few users are ''dominated by an active insiders' club.'' she said.

So what's a new investor to do? One way to cut through the thicket is to pick a coin or token that is built to fulfill a certain purpose - as an alternative to traditional money, like Bitcoin, or as a way to transfer money to parts of the world where basic banking services are hard to come by.

No matter how its value fluctuates, the thinking goes, there will be a reason to use it, which can make it a good investment.

But it's hard to determine when the crypto bubble will burst, or if there is one.

The Publishing continues into the future. The World Students Society thanks authors Emily Flitter and Karl Russell.