As of 2021, there are approximately 6000 cryptocurrencies available, with the top 20 making up nearly 90% of the total market. There’s no denying that the emergence of this new class of assets has changed the investment landscape in the past few years. The global cryptocurrency market size was estimated at $1.4 billion in 2020, and is anticipated to reach $4 billion by 2030. With the increasing popularity of digital assets, more people are jumping into cryptocurrency trading than ever before.
As it can be expected, there are both advantages and disadvantages when buying and selling crypto. A lot of people argue that crypto trading is nothing more than a form of gambling. Critics cite high volatility, unpredictability and potential for large losses to place cryptocurrencies in the gambling category. However, just because there are certain similarities between crypto trading and gambling it doesn’t mean we should equate the two.
The simple truth is that cryptocurrency, just like any other type of asset, can be both an investment and a gamble. It’s the strategy people use when managing their assets that makes the difference between these two activities. Whether you’re investing or gambling, it all depends on your approach to crypto trading.
3 THINGS YOU NEED TO KNOW
1. INVETSMENT ARE LONG-TERM, WHILE GAMBLING IS SHORT-TERM
The truth is, cryptocurrency could be either an investment or a gamble, depending on your strategy.
If you’re buying crypto for the sole purpose of trying to get rich overnight, then it falls into gambling territory. But if you truly believe cryptocurrency is the way of the future and will be around for decades to come, then buying it now could be considered more of an investment.
No matter where you choose to invest, it’s best to take a long-term strategic approach. Don’t invest in anything you’re not willing to hold for at least a few years, or ideally decades. Cryptocurrency is extremely volatile in the short term, but if you believe in its future, you could stand to make a lot of money over time if it succeeds.
There are no guarantees that cryptocurrency will succeed over the long run, and you could still lose everything even when taking a long-term approach. But you’re less likely to lose money than if you were to try to time the market to make a quick buck in the short term.
2. INVESTMENT IS TAKING CALCULATED RICKS
Investing will always carry some degree of risk, even if you’re investing in relatively safe places. But becoming a successful investor involves taking calculated and educated risks, and the same is true when it comes to cryptocurrency.
If you put your life savings behind cryptocurrency, that’s definitely a gamble. But there are ways to invest in cryptocurrency in a more calculated and safer way.
First, make sure your financial situation is healthy and you’re only investing money you can afford to lose. Next, double-check that your portfolio is properly diversified. If you’re adding crypto to the mix, you’ll want to be sure the rest of your investments are as strong and stable as possible. Then if crypto does fail, it won’t take the rest of your portfolio down with it.
By being strategic and careful about how you invest in cryptocurrency, it’s possible to reduce your risk.
3. WHERE IS YOUR INVEST MATTER?
Cryptocurrency, in general, is risky. But some cryptocurrencies are more dangerous than others, and choosing the wrong one could be a gamble.
While cryptocurrencies may be very different from stocks, you can still research them in much the same way you would other investments. With stocks, it’s important to look at a company’s underlying fundamentals to determine whether it’s likely to grow over time. The same is true for cryptocurrencies.
As you’re researching different types of cryptocurrencies, ask yourself a few questions. Does this particular cryptocurrency have any real-world utility right now? If not, how likely is it to become mainstream in the future? Does it have any advantages over its competitors? If new cryptocurrencies come along, how likely is it that this one will retain its advantages?
If you’re choosing cryptocurrencies based on how trendy they are or how much their price has increased, that’s more similar to gambling. But if you do your research and are buying the cryptocurrency you believe is the strongest, then it’s more of an investment.
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