Is Buying Cryptocurrency An Investment Or Gambling?

Sometime in 2023, a notable coalition of lawmakers in the United Kingdom called for purchasing crypto to be regarded as gambling as they considered regulating the crypto industry. They contend that because cryptocurrency is such an extremely risky field, it is more like gambling than investing, and that the only thing determining a currency’s valuation is what the market is willing to pay for it.

In one of its studies, the Treasury Committee, a group of UK Lawmakers responsible for monitoring the financial services industry, stated that cryptocurrency had “no intrinsic value and serves no useful social purpose, and these characteristics more closely resemble gambling than a financial service.” The committee was also documented, stating: “The events of 2022 have highlighted the risks posed to consumers by the crypto asset industry, large parts of which remain a wild west.”

Observing the fluctuations in the value of Bitcoin over time reveals that although they have made some people wealthy individuals, others have also lost everything they ever had. The cost of a Bitcoin has fluctuated over the course of the past six years, rising from around $3,500 to $65,000. As of the time of compiling this document, its current value is around $70,000. Several cryptocurrency charts demonstrate how quickly values may rise or drop significantly. For instance, in August of 2023, when buying cryptocurrencies like BTC, it was worth around $25,000, and within a few weeks, it cost around $40,000 in December.

Furthermore, as stated by British Members of Parliament, the only real value in cryptocurrency is what other people are willing to pay for it. You might argue that in the end, the same idea holds true when you purchase shares in a company, but at least there are a lot of concrete components, including the firm’s previous success, the caliber of its management team, and its strategic goals, that affect the appetite for the stock.

When you purchase a commodity, similar to gold or art, you often get to handle the object in your hands, and depending on its quality, it could even delight you or a potential buyer.

In addition, a lot of individuals find cryptocurrency to be mysterious, which supports the idea that it might be challenging to carry out the necessary due diligence before making an investment. Furthermore, locating a financial advisor with expertise in cryptocurrency is far more difficult than in traditional investing.

In the beginning, several individuals saw people who invest in cryptocurrencies like Bitcoin as gamblers who are looking to collect quick gains without actually knowing anything about it or trying to make an effort to learn. Also, some understood it and viewed it as a long-term investment and not just crypto gambling.

Regardless of your point of view, these experts are right when they say that many people were unaware of the numerous details involved in investing in Bitcoin, unlike with traditional investments or other aspects of personal finance. They are essentially gambling if they don’t do some homework, something they will most likely do with other investment chances like stocks and personal money.

Even with the knowledge attained by crypto experts, they still record some amount of losses. Now, considering someone who doesn’t devote a huge amount of time to the subject. How will such individual fully understand crypto to the level required to pump lots of money into it, to call it a form of investment?

Regarding whether or not cryptocurrency is a wise investment, even those in the know are unable to agree. While some well-known billionaires, such as Elon Musk, have publicly endorsed cryptocurrencies such as DOGE and BTC on social media, other notable investors, including Charlie Munger and Warren Buffett, have publicly expressed their disapproval of the innovation.

Some would even argue that cryptocurrency is more of a gamble than an investment due to its extreme risk. In addition, there are a few things you have to be aware of between investing and gambling before making a crypto purchase.

Investments Are Long-Term, While Gambling Is Short-Term

In reality, according to the strategy you choose, crypto might be a gamble or an investment. Purchases of cryptocurrency that are made with the express intent of trying to make quick money are gambling. However, purchasing Bitcoin and other altcoins today because you really feel it is the way of the future and will be there for many years can be viewed more as an investment decision.
It is advisable to have a long-term strategic tactics while investing, regardless of the place that you choose to invest. Before making any kind of commitment, aim to hang onto your investments for a minimum of several years, if not several decades. While crypto volatility over the short term is rather high, if you have faith in its long-term potential, you might end up with substantial financial gains.

You should also note that you might still lose everything even if you take a long-term strategy to crypto investing because there are no assurances that it will prosper in the long run. But compared to trying to time the market for short-term earn or for fast profits, you have a lesser likelihood of losing money.

Investing Is Taking Calculated Risks

No matter where you invest—even in somewhat safe areas—there will always be some risk involved. Yet, taking measured and informed risks is necessary to become a successful investor, and this also applies to buying crypto. There’s undoubtedly a risk involved in investing your life savings in cryptocurrencies. However, it is possible to make safer and more thoughtful crypto investments.

Establish that you are investing money that you can afford to lose and that your financial status is sound beforehand. Check your portfolio again and again to ensure that it is appropriately diversified. As with any investment, you should make sure the other assets are as solid and steady as possible before adding cryptocurrency. In the event that cryptocurrency fails, the remainder of your portfolio won’t crash along with it.

You can minimize your risk while investing in cryptocurrencies by using caution and strategy. If you don’t do this, you are considered a gambler.

Where You Invest Matters

In general, cryptocurrency could be highly risky. However, picking the incorrect crypto might be a gamble because some are riskier than others.

You can carry out research on cryptocurrencies in a manner similar to that of other assets, even if they could differ significantly from equities. When investing in stocks, it’s critical to consider the underlying fundamentals of the business to assess its prospects for future growth. This applies to cryptocurrencies as well.

As you investigate various cryptocurrency kinds, ask yourself a few queries. Do these specific tokens currently have any use in the real world? If not, what is the likelihood that it will eventually become popular? Does it offer any benefits over its rivals? What is the likelihood that this cryptocurrency will continue to have its benefits in the event that other ones emerge?

Selecting cryptocurrencies based on their popularity or how much the crypto price has grown over either the short or long term is more akin to online gambling. However, it’s more of an investment if you do your homework and purchase the cryptocurrency you think is the strongest based on provable facts you’ve discovered during your research.

We don’t think that investing in cryptocurrencies is (in and of itself) gambling unless you’re in a crypto casino. But if you’re prone to compulsive gambling, you should be mindful of certain concerning parallels.

“Get Rich Quick” Programs

You might be taken advantage of for your innocence and optimism in both gambling and cryptocurrency trading. Any casino employee will tell you that all you have to do is play one more round actually to win! In a similar vein, you’ll hear from your favorite influencer or celebrity that the newest cryptocurrency on the block is your route to financial freedom. Foolishly, you settle down to gamble online or invest a few hundred dollars in the newest cryptocurrency, only to be conned out cold by a dealer who knows the house always wins or by a pump-and-dump token scam. Generally speaking, if something seems too good to be true, it typically is—especially if someone is asking for your money in return.

The Positives and Negatives

The “high” from rising cryptocurrency values or a winning gambler’s winnings seems worth all of that dangerous expenditure. This may result in a dysfunctional pattern of behavior where the individual “chases” the dopamine that their brain releases while they are feeling elevated. The risks keep getting higher until a fixation or fully-fledged problem behavior emerges because the human brain wants novelty.

Uncertainty and Volatility

The long-term prospects of cryptocurrencies remain uncertain, and it is nearly hard to forecast their pricing. Consequently, investing in digital currencies of any type, whether they are Bitcoin, Ethereum, or other “altcoins,” entails enduring the continual pressure of fluctuating cryptocurrency values. Enthusiasts of cryptocurrency may persuade themselves to keep investing in the market or hold onto their money even as it crashes and burns, much like compulsive gamblers who believe that one more turn of the wheel will bring home the big prize.

Even though it’s in different ways, both individuals have the cards stacked against them and are putting their confidence in an unstable, unpredictable system.

Put simply, if you consider yourself to be knowledgeable in the crypto markets and know them wholeheartedly, then you are naturally in a strong position to make your own decisions about what and when to purchase and sell.

Investing is OK if you don’t understand the markets inside and out, but as long as you understand the dangers and can afford to lose your money, going ahead to invest in cryptocurrency will be your gambling. As of the moment, investing in cryptocurrencies is still quite speculative because no one can predict where the prices will go. Cryptocurrencies are relatively new, in contrast to equities. Furthermore, there’s always a potential that you might lose money, no matter how hard you attempt to lower your risk.

For the time being, it might be advisable to avoid cryptocurrencies if you’re a risk-averse investor.We hope this essay will help you understand what you’re getting into with cryptocurrency rather than advise you to avoid it altogether. We hope it turns out to be a profitable endeavor for you, but no one can predict with certainty if that will be the case.