There is a thin line between gambling and investing when it comes to cryptocurrency. In gambling, you are high on adrenaline thinking of the possible returns and you choose to trust your gut as place your bet. In investing, you put your cash in growing assets aiming to get a profit from the growth of the asset. In the later, the returns you expect to gain are in the form of winnings while in the former you get profits as returns.
Cryptocurrency investing is seeing as a gamble by most economists as their values are dependent on speculations. The would-be crypto investors are awed with the hype surrounding this digital currency enticing them to buy into the volatile space. With all the digital currencies coming up, it is becoming more and more difficult to separate the genuine and legit coins to invest in.
Criminals are now venturing into cryptocurrency investing and introducing fraudulent promising ICOs. Pyramid and Ponzi scheme scams are circulating all over the internet of nonexistence virtual currencies. In most cases (the exception being the early investors), investors are not able to get the return of their investments when it comes to digital currency. The volatility in crypto currencies has made experts classify this investment as a gamble.
Differences between Investments and Gambles
To know if you are making a gamble with your money or not, it is important to know the differences between gambles and investments.
- Investments are done with numbers that can be used to calculate and predict the outcome of your investments. Gambling is a game that capitalizes on chances and probability.
- An investment is an asset while a gamble is not considered as one.
- One can carry out an investment portfolio analysis while a no analysis can be done on gambles.
- There is a house that is usually involve in gambling whereas in investments, no houses are involved apart from markets.
In both gambling and investing, one is advised on the period they should cash out and only to use their excess cash to gamble or invest in risky ventures.
Investments should not be treated as a gamble. While getting into cryptocurrency, one should be able to ask themselves this questions.
- Is the investment going to grow? You should invest in assets that have a chance of positive growth.
- What time will it take for you to get your return on investment?
- What incentive is being offered in the investment? Some stocks give good dividends as incentives. For cryptocurrency, the incentive is based on speculation that the value of the coin will increase.
As an investor in these development age of the blockchain technology, it is important to get that investing on digital currency is a gamble. One should not take up a loan to finance cryptocurrency purchase neither should one invest with cash they are not ready to lose. This year, most banks have stopped their clients from purchasing cryptocurrencies with credit cards because of the rise in defaulting numbers.
Investors are investing blind into the blockchain technology and the gamble is not a safe bet for most customers. Regulations, transparency, and accountability need to be implemented on this emerging technology to make it a safer bet for the investors.