Cryptocurrency: Are you missing out?

Do you suffer from FOMO?  FOMO stands for Fear Of Missing Out.  Just about everyone suffers from this in one way or another.  Bitcoin and Dogecoin, among other cryptocurrencies have become household words and their popularity is exploding. So what is cryptocurrency, and is it something you should invest in?

What is cryptocurrency?

Cryptocurrency is a form of currency that only exists in numbers on a computer screen, rather than an actual coin or physical dollar bill. It is a form of international currency and it is the first decentralized digital currency in the world.   You can buy cryptocurrency from any online seller, by trading your dollars for whatever cryptocurrency you choose.  Bitcoin was the first cryptocurrency, but there are many other types of cryptocurrency now trying to surpass bitcoin in popularity.  As of right now, most people view cryptocurrency as an investment more than as an actual currency.

Why is Crypto so popular right now?

The price of 1 Bitcoin started out close to $1 back in 2011, and now the price of 1 bitcoin is about $38,000. Even just a few weeks ago it was around $60,000!  That is some pretty extreme price fluctuation.  So yes, some people have made a fortune if they got in before it was cool.   Other types of Cryptocurrency like Dogecoin, and Etherium have also seen some decent growth recently in terms of price.   But the swings are pretty wild, with huge percentage drops following huge run ups.

Should you invest in (buy) Cryptocurrency?

Investing in cryptocurrency is much more similar to gambling, than it is to investing in diversified stock based mutual funds.   Yes, if you mortgage your house to buy Bitcoin now, you could be filthy rich in a year, but you could also be completely broke too.   There is so many regulatory issues that crypto has not made it through yet, and there have been several instances of price manipulation and fraud.   If a “bad guy” wanted to commit a financial crime and fly under the radar, cryptocurrency seems to be the easiest way to go.

My main suggestion when it comes to cryptocurrency is to only use money that you absolutely do not need and could live without to invest in it.  If you like thrill rides and want to try it out, go right ahead, but not with grocery or retirement money.

I have personally been watching the prices of the popular cryptocurrencies over the last few months, and the price swings have been pretty extreme on a daily basis.  The price volatility seems to be about 10 times more extreme than the price volatility of the stock market.

For me there is still far too much uncertainty when it comes to investing in cryptocurrency.  I don’t personally own any, and I advise clients, friends, and family to stay away when they ask me about it.

Buying Bitcoin without actually Buying Bitcoin

The prudent way to invest in cryptocurrency, is by investing in a globally diversified stock portfolio.  In this way, you are in turn investing in lots of companies that buy, sell, and accept cryptocurrency.  In this way you take a lot of the risk out of it, and get more steady returns.  Your Fear Of Missing Out thirst might not be quenched, but you will be able to sleep better at night and still get a pretty good long term return.

By Jimmy Hancock

References

  1. Ramsey Solutions. “What Is Cryptocurrency and Should I Invest in It?” Ramsey Solutions, Ramsey Solutions, 13 May 2021, www.ramseysolutions.com/retirement/investing-in-cryptocurrency.
  2. “Yahoo Finance – Stock Market Live, Quotes, Business & Finance News.” Yahoo! Finance, Yahoo!, finance.yahoo.com/.

 

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