Is Cryptocurrency A Good Investment? Only If You Like Gambling With Your Savings

Don’t buy when the prices have gone up so much in a short amount of time and the markets are hyped up. Of course, for all your investment decisions, you must analyze the market from different points than just the low price. If you’re buying a cryptocurrency to hold long term, you’re looking for capital appreciation. If you’re actively getting in and out of trades, you’re speculating. At the time of writing, over 2,000 cryptocurrencies other than Bitcoin are out there, and the number may change drastically in the future.

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Just when you thought investing couldn’t get weirder, an internet dog meme became the hottest new cryptocurrency. You could also buy thoseNFTswe were just talking about with cryptocurrency, if owning the world’s first digital perfume or digital toilet paper with flowers is your thing. Yes, those are “real”—but that’s a story for another day.

But we are saying that crypto doesn’t have a proven track record of building wealth. Cryptocurrencies are based on something called blockchain technology. A blockchain is like a really long receipt that keeps growing with each exchange of crypto. It’s a public record of all the transactions that have ever happened with a given type of cryptocurrency. Yes, it sounds like it’s straight out ofThe Matrix. Just think of it like a ledger that shows the history of that piece of currency.

But there’s no denying the fact that everything anonymous is super shady. The strangest reality about the intersection of investing and gambling is the same asset can theoretically be either an investment or a gamble. It’s the strategy and planning behind the asset which decide whether or not you’re gambling. So, all ofthatto say, there’s no shortage of coins to invest in out there in cryptocurrency land. And depending on what’s trending that day (Dogecoin, anyone?), you’ll see the value on these coins go up and down like one of those swinging pirate ship rides at a carnival.

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First and foremost, investors need to wise up and U.S. regulators need to step up. Investors need to understand that in these early days, a gamble on cryptocurrencies or any other application of blockchain technology is just that — a gamble. People should not speculate with money they cannot afford to lose, and they certainly shouldn’t gamble with borrowed funds. Earlier this year, major banks stopped letting people buy cryptocurrencies with credit cards because of a ballooning risk of defaults.

Is cryptocurrency is a good investment

So where the heck do we get the wordcryptocurrencyfrom, anyway? It comes from the wordcryptography—meaning the art of writing or solving codes. Sounds like the setup of anIndiana Jonesmovie, right? Each coin of cryptocurrency is a unique line of code. And cryptocurrencies can’t be copied, which makes them easy to track and identify as they’re traded.

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And the lead agency needs to have the budget necessary to launch investigations and bring cases against bad actors. All it takes is five minutes on the internet to know not everyone has your best interests at heart. Scammers will stop at nothing to get access to your personal information and passwords—even your bank account. The value of cryptocurrencies goes through extreme ups and downs. There’s no denying that some are really hot right now—but for how long?

She delivers workshops and seminars to corporations, universities, and investment groups, and has been featured in Forbes and on CNN. She was named the 2018 Personal Investment Expert of the Year by Wealth & Finance International. Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Yeah, it’s the household name that most people think of when you talk about cryptocurrency.

Cryptocurrency Makes Fraud Easier

In the crypto world,mininghappens when people use their computers to solve super complicated math problems that make sure new crypto transactions are correct. Then, those transactions get added to the blockchain . As a reward for making sure a purchase made with crypto is legit, these people mining are then paid in cryptocurrency. Cryptocurrency is exchanged person-to-person on the Web without a middleman, like a bank or government. It’s like the Wild West of the digital world—but there’s no marshal to uphold the law. This fundamental question of who regulates this world and to what extent needs to be sorted out quickly to protect consumers and build confidence in the entire ecosystem.

If you chase crypto based on what’s hot that day, you’ll probably wind up sick too . That’s what it’s like to exchange cryptocurrencies. They’redecentralized—which means no government or bank controls how they’re made, what their value is, or how they’re exchanged. Because ofthat, cryptocurrencies are worth whatever people are willing to pay or exchange for them. You’ve probably heard of people making (or losing!) hundreds of thousands of dollars by investing in cryptocurrency. It feels like a modern-day gold rush all of a sudden.

Additionally, investors generally have specific goals for specific accounts whether the money is meant for retirement, college, or some other time-determined event. Gamblers primary goals revolve around winning the bet, without any additional structural elements or constraint. Plain and simple—investing in cryptocurrency is not a good way to build wealth for your future. Now, we’re not saying that cryptocurrency is going to go away.

Trading in cryptocurrency is kind of like gambling. Because it’s exchanged person-to-person withoutanyrealregulations, there’s no pattern to the rise and fall of its value. You can’t figure out the changes or calculate returns like you can with growth stock mutual funds. There just isn’t enough data, or enough credibility, to create a long-term investing plan based in cryptocurrency. Don’t play poker with your financial future here. I’ve always believed a person can earn the right to take additional investing risks by creating underlying financial stability in their life.

The primary difference between gambling and investing is an investor will use tools of diversification to mitigate risks and decrease the chance for loss. A gambler is typically all-in with a singular lever dictating whether they win or lose. And even if you hold different types of cryptocurrency, the use of a single asset class means you aren’t mitigating risk through asset allocation and diversification.

  • Cryptocurrency is exchanged person-to-person on the Web without a middleman, like a bank or government.
  • Kiana Danial is the CEO of Invest Diva as well as an internationally recognized personal investing and wealth management expert.
  • There is no inherent «all or nothing» moment here.
  • Just think of it like a ledger that shows the history of that piece of currency.
  • It’s true—crypto is about as hot-tempered as a 2-year-old.
  • Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992.

It’s the hot buzzword of the investing world these days. Ever heard of Bitcoin, Dogecoin, Litecoin, XRP or Ethereum? Nope—they aren’t embarrassing rock band names from the ’90s. They’re actually types of cryptocurrencies .

Cryptocurrency Is Unstable

For instance, a healthy emergency fund, a properly funded retirement strategy, and the absence of consumer debt make investing excess funds in speculative vehicles much more tolerable. It’s tough to accomplish this level of stability when your entire net worth is tied-up in something as volatile as crypto. Don’t give in to a craze just because there’s a lot of hype.

Would-be investors, dazzled by the hype and unaware of all the risks, must beware the risks inherent to this volatile space. There’s still far too much bad information circulating about buying How to Send and Receive Crypto and trading cryptocurrencies. Only if you like gambling with your savings. It means that instead of panicking when the prices drop to a dip, it may be the best time for you to buy.

Is cryptocurrency is a good investment

It’s mathematical proof that the exchange was legit. Investing, when done well, is really boring. With hundreds of competing cryptocurrencies in play it is still difficult to tell the difference between the legitimate actors and the scam artists.

Things You Must Have Before Investing In Cryptocurrencies

We’ve talked to people who havetaken out a mortgageorcashed out their entire 401 earlyto invest in cryptocurrency—heck no! Don’t put it all on the line and risk your financial future, your retirement dreams and your family’s well-being. If you can’t afford to lose the money, don’t invest it in something as unstable as crypto. Diversify your portfolio with at least ten cryptocurrencies from different categories to manage your risk. Expand your horizons by investing in stocks with exposure to blockchain technology and the cryptocurrency market. Dogecoin(pronounced “dohj-coin”) started as a joke back in 2013 and is now the hottest thing to invest in.

But cryptocurrency is quickly gaining speed and becoming more widely accepted as currency. And using crypto in this way could become even more popular as these cryptocurrencies keep gaining trust. This one is the next most popular cryptocurrency after Bitcoin.

Nfts: The Crypto Art Craze Explained

And even though Ethereum is like Bitcoin with its crypto coins , it’s a little different too. While Bitcoin was created to become an alternative option to traditional currencies like the dollar, Ethereum has evolved into a network that can be used to do old things in new ways. Even though cryptocurrency is rocky, crypto investors seem to like Bitcoin because they think it has a little more strength and stability than the rest. It’s also valued much higher than its competitors . You store your cryptocurrency in something called a digital wallet—usually in an app or through the vendor where you purchase your coins. Your wallet gives you a private key—a unique code that you enter in order to digitally sign off on purchases.

Cryptocurrency investing is very new; therefore its investment resources are constantly evolving. This website is using a security service to protect itself from online attacks. The action you just performed triggered the security solution.

He also worked as an equity analyst at Credit Suisse First Boston. Tim has a bachelor’s degree in economics from Stanford University. Prior to founding NerdWallet, Chen was a hedge fund analyst at Perry Capital investing in payment processing firms, credit card networks and technology companies.

Checking Cryptocurrency Fundamentals Before Adding To Your Portfolio

Could crypto become a more legit way to invest later on down the road? Listen, you can try your hand at cryptocurrency if you want to. If you have some money you’re willing to lose, money that you might have thrown away on a roulette wheel in Vegas instead, https://xcritical.com/ knock yourself out. But we want you guys to win with money and secure your retirement future—and there is just no evidence that cryptocurrency is going to do that for you. At this point, most people still see cryptocurrencies as an investment.

Some major retailers—like Whole Foods, Nordstrom, Etsy, Expedia and PayPal—are now letting people pay using crypto. And of course, any two people who value the tokens can exchange them for goods or services with each other. There is no inherent «all or nothing» moment here. You can take money off the table and do something less speculative with it. Recently, the SEC directed crypto exchanges and ICOs to register with them in an attempt to rein in the worst abuses. By checking this box, you agree to the Terms of Use and Privacy Policy & to receive electronic communications from Dummies.com, which may include marketing promotions, news and updates.

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