Why compare crypto to investing?Glad you asked! Because cryptocurrency is not investing. I look at this the same way I look at the lottery. There is a possibility that it can make you rich, but the probabilities are against you. Be careful with investments that are hard to evaluate. You might be feeling FOMO, but don’t believe all the hype.
Crypto Is Not Investing
Investing is the action of expending money to generate profit by putting it into an investment vehicle such as shares, property, or business.
When looking at the stock market, there are assets (products or services) associated with each company. The value of its stock comes from sales/revenue. In other words, there is something to backup/justify the price you pay for that stock. Although a company’s stock might be under or overpriced; it does not change the fact that there is a product or service.
| STOCK | CRYPTO CURRENCY |
| Regulated | Not Regulated |
| Backed by Assets | Not associated with asset |
| Predictable | Unpredictable |
| Market Hours | Market never stops |
| Volatility | High Volatility |
FOMO Is Real!
If you feel as if you are missing out on an opportunity to make money, you are not alone. Few things to consider before buying crypto:
- You’re making a bet: don’t invest too much or use it as your main investing strategy.
- No one knows how it works: because there is no asset associated with it, it can go up and down based on a tweet. Very unstable.
- Not enough data to make a prediction: unlike the stock market with hundreds of years of data to analyze trends, crypto is new and has no history for reference.
- Not regulated by the government: this can be good or bad. Government regulations ensure that no fraud is carried out, but it also limits what individual can/can’t do. Since crypto is not regulated, anything goes!
- Uncertain future: will we be able to purchase goods & services with crypto? Tesla did accept bitcoin as a form of payment, but then it stopped.
The biggest crypto currency is bitcoin. For the lucky ones who bought into it earlier on, they are millionaire now! But let’s look at the price change over 1 year (July 2020 – July 2021).
Low: 8,608
High: 64,788
I don’t know about you, but 56,180 fluctuation in just one year is too much! I’m not willing to take on that much risk. I’m not saying you should never trade crypto, but ensure your regular investments are maxed out before going on this adventure.
As always, do your research before jumping into any opportunity! There is potential for making money but the risk might just be a little more than I’m personally willing to take. If you do buy some crypto, let me know how it goes.
