Why Cryptocurrency Is A Daunting Investment

The rise of cryptocurrency has been one of the most interesting stories of the last several years in fintech. 2017 marked the first year in which we really saw significant gains in crypto values that could result in widespread investment rewards though. It’s true that some of the earliest investors, such as the Winklevoss twins, might have made a fortune even before 2017 by buying into bitcoin in large quantities when it was worth less than a dollar. This is why the Winklevoss twins earned a mention in our look at the crypto kings, and why their name has become synonymous with fintech. But for the most part 2017 was the first time we saw major gains for average investors, many of whom profited when bitcoin and other cryptocurrencies spiked dramatically throughout the year, and particularly in November.

One would think that as a result 2018 would have brought about significant attention toward cryptocurrency investment, as well as a massive influx of amateur buyers. It’s somewhat difficult to measure expected trends like this with a global financial phenomenon, but it’s probably fair to say there hasn’t been quite as much enthusiasm as we might have anticipated. So what makes cryptocurrency such a daunting investment? A few factors may come into play.

The Crash:

The most obvious factor is the massive cryptocurrency crash that followed the incredible gains of late 2017. With many professionals and experts in the investing world having predicted a bitcoin bubble, the near-$20,000 highs proved to be just that, and the burst was painful for a lot of people who had purchased cryptocurrency. Bitcoin and many of its counterparts plunged dramatically, losing money for a lot of people and more importantly, firmly establishing in the minds of many that cryptocurrency just isn’t safe.

If you’ve ever been very involved with the world of investments, you’ve probably been confronted the question of how it’s different from gambling. And you’ve probably come to realize that investing is not the same thing as gambling, namely because when you invest you have an expected positive outcome, as opposed to one that’s loosely projected or hoped for. With investment – at least done properly – you can have droves of data at your disposal to show you what should be the likeliest outcome. This isn’t necessarily true for cryptocurrency, at least yet. There just isn’t much data or precedent, which makes the whole thing feel more like gambling.

This actually goes hand in hand with the idea of having limited data, though it’s worth mentioning separately. One reason cryptocurrency can feel like a particularly daunting investment asset is that the news surrounding its movements is often unclear. For instance, for a long time we looked at increasing regulation as a bad thing, and in some cases major markets regulating cryptocurrency even seemed to coincide with slides in value. Now, however, we’re hearing more and more about how more regulation might ultimately be good for cryptocurrency markets. Basically, this is new fintech that’s still figuring itself out, and in the meantime the headlines and analyses are all over the place.

By this we simply mean that the means by which you can buy, hold, and sell cryptocurrency are still a little bit mysterious or inaccessible to many potential investors. This is why we see conversations about the most beginner-friendly wallets and exchanges, which is nice, but really implies that crypto wallets and exchanges in general aren’t particularly useful to first-timers. In this sense, cryptocurrency can be daunting simply because it’s complicated to deal with even for those who want to.