Is Cryptocurrency Really the Way to Build Wealth?
New entrants to investing may be drawn in by the lure and mystery surrounding cryptocurrencies, but are they really the best markets to trust with your hard-earned cash?
Financial markets are inherently changeable; that’s what makes them so attractive to investors. The returns for those who are successful have the potential to generate long-term wealth and the means to set them up for life. Of course, there are always risks, and anyone considering a move into the markets must be aware of these first.
Since the dawn of traditional trading, arguably further back still, there have been investment opportunities that have grown in popularity and favor, building from a niche then being welcomed by so-called early adopters and eventually becoming mainstream — generally following media exposure and the clamor that follows.
In the past, BRIC economies, Asian tigers and internet stocks were all perceived to be sensible investments, fueled by self-appointed thought leaders and media outlets. However, in the end they fell from favor, value and only long-term or experienced traders stood a chance of coming out ahead. Today, “reaching for the yield”, internet stocks and infrastructure are hot themes that could last the distance or go the way of their predecessors. Even mature and highly-regarded investments such as bonds aren’t free from critics.
And of course, then there is crypto investment. There have been very few investment options that have caught the attention of the general populace quite like cryptocurrency in the past year or so. Bitcoin went from obscurity in the early 2010s to an at-publication peak of $19,343 USD in late 2017. This was before experiencing a dramatic fall in value. The crypto coin currently sits at around $6,400 USD.
The allure of crypto investing is understandable, given the amount of Hollywood-style rags-to-riches Bitcoin stories you can find online. But investing newcomers would do wisely to check the date stamps on those articles. There are far, far fewer examples of newly-minted Bitcoin millionaires out there today. The entire crypto market is, naturally, volatile, and there are more stable alternatives out there. Forex trading, for example, is established and well understood. Shorthand for foreign exchange trading, the idea is simple enough for beginner investors to understand. Though still comprehensive and complex enough for advanced traders to enjoy serious returns from forex, given the right environment, timing, and judgment.
Cryptocurrencies are currently so unpredictable, in part due to the relatively short amount of time they have been available. A general lack of understanding at a regional and international level has led to legislation being slow to regulate and adopt this new wave. A number of initial coin offerings (ICOs) have been widely funded only to go sour when it came to releasing funds further down the line.
Traders at any stage of their career would be wise to consider whether their money would be better invested in trending opportunities such as crypto, or more mature markets such as forex, stocks and bonds.