For a better part of the first decade of their existence, cryptocurrencies enjoyed limited
attention from a rather exclusive pool of patrons. Then, sometime around 2017, cryptos –
Bitcoin in particular – started making headlines with their steadily bullish ride at the trading charts. Today, cryptocurrencies are a raging trend that everyone, from Elon Musk to the guy next door, seems to be talking about.
Even those who don’t fully understand the inner workings of the crypto market or haven’t
dipped their toes in trading it have a basic idea of the concept. However, certain aspects of crypto – their unregulated nature, which is in sharp contrast to the conventional fiat
currencies – still make people sceptical about it, leaving them to wonder if trading in the
likes of Bitcoin and Ethereum is investment or gambling.
WHY INVESTING IN CRYPTO CAN SEEM LIKE GAMBLING
Thinking that the lines between trading cryptocurrencies and gambling are blurred,
confusing one to be the other, isn’t without reason. Those who don’t understand the
intricacies of crypto trading may see it as being comparable to a gamble. One of the most
obvious reasons for that is the large risks involved in both.
For many beginners, the odds of seeing any substantial returns of their crypto investments are towering. Besides, the risk of losses owing to any sudden crash in value cannot be ruled out. This can make crypto trading seem like a risky proposition to anyone without the know- how to read market trends and work with the right tools to make informed guessesregarding their investment decisions.
Another commonality is that the two operate outside government approval and regulation.
While gambling is illegal in many countries, many governments across the world are looking for ways to regulate cryptocurrencies. India, for instance, has a bill in the works to ban cryptocurrencies like Bitcoin and Ethereum and penalise miners.
This legal grey area also makes many people jittery about crypto trading. Not to mention
that success and failure, gains and losses in both crypto trading and gambling entail a
certain degree of chance and luck.
WHY CRYPTO TRADING IS NOT GAMBLING
Is crypto trading risky? Yes, it is. Does it involve instant reward and losses? Yes, it does. Even so, it is not gambling. The key difference between the two is that as an investor trying to build or augment wealth through cryptocurrencies, you will have at your disposal a range of diversification tools that can help mitigate risks and minimise the odds of losses.
Gambling, on the other hand, is an all-in proposition where wins and losses are determined by a singular lever. There is no room to make informed bets, where you at least have some idea about how they will pan out. You go in blind and leave it all to chance.
Just like any other investment that serves as an alternative stream of income, with crypto
trading too, you can set specific goals, risk appetite through asset allocation and diversification. In gambling, the sole goal is winning bets without any constraints or
structural elements of support.
It is this strategic planning that separates investment from gambling, even if you’re using
the same pool of assets for both.
Another key difference is that gambling is exciting, often driven by the anticipated adrenalin rush of winning. Crypto trading, in contrast, when done the right way can be tedious because it is based on a great deal of research and assessment. Even if you’re buying or selling a position instinctively, that instinct comes from a place of knowledge.
Besides, crypto trading can be a tool to build wealth over time, even if you’re making small
gains. However, with gambling, the returns are often erratic and fleeting. You cannot build
sustainable wealth or create underlying financial stability through it unless you hit the
CRYPTO TRADING MAY NOT BE FOR EVERYONE
That said, investing in something as volatile and speculative as crypto may not be for
everyone. It may be the most fitting investment option for those who already enjoy a
certain degree of financial stability marked by a well-funded retirement plan, contingency
funds, money for health emergencies and an absence of consumer debt.
Alternatively, you could leverage it without sacrificing conventional financial security by
finding a balance between crypto holding and other investment avenues. Doing so can make your investments in cryptocurrencies seem like less of a gamble and more a part of a larger investing strategy. On the one hand, you will be able to cash in on the phenomenal rise of crypto, and on the other, build a more reliable financial base.
The long and short of it is: crypto trading is far from gambling, provided it is done based on insights and not hunches.