As I’m sure you already know… one of the best (and most efficient) ways to grow your wealth is to invest. And this is a big deal because investing your money makes it work for you instead of you having to work every second of your life just to get by.
If you have desires to retire, live your dream life, plan for the future, and generally gain financial freedom, the best thing you can do is to invest as much money as you can now.
But that brings us to an important question: where and how to invest?
Choosing where (and how) to invest is tricky. After all, you want to ensure your hard-earned money isn’t squandered away. This brings us to Cryptocurrency because it’s one of the most talked-about “things” in the world right now. It has so much potential and promise. Yet it also seems VERY risky. So before you decide to park your money in one type of investment, remember that investing in crypto isn’t the same as investing in stocks and vice versa. It might seem like cryptocurrencies are ruling the world at this point in time because they seem to have made many people very rich — but they suffer from several drawbacks. Which is why I stay away from them and will continue to.
That’s right! I do not trade cryptocurrency.
This does NOT mean I believe cryptocurrency does not have a future. In fact, some of my students have gone onto trade cryptocurrency using the techniques and strategies they learn from me inside The Freedom Challenge. Following my strategies, they’ve been able to replicate their success in crypto as well! There are benefits to crypto trading as well. In fact, digital currency is the future, and crypto is simply one way to operate digital currency. It’s just that it’s my personal preference–at this point of time at least–to not trade them myself. Now that we have that out of the way, let us get to the bottom of what cryptocurrency is, why it is so popular and why I do not trade cryptocurrency.
What is Cryptocurrency
and Why Has it Become So Popular?
Cryptocurrency has been a trending topic for a while now. You have probably read the word Bitcoin floating around on social media. You might have heard that their prices have skyrocketed recently. You probably also read that Tesla has bought Bitcoin worth $1.5 billion and plans to accept it as payment.
Bitcoin is a cryptocurrency, but it is just one amongst many. There are hundreds.
Bitcoin is the oldest so it’s the most widely known. It’s the Coca-Cola of the cryptocurrency world. Most recognizable but certainly not the only one. Some other types include Litecoin, Ethereum, Ripple, Cardano, Polkadot, Stellar, Tether, and many more. Cryptocurrency is a virtual currency that’s secured with strong cryptography for secure transactions. It can be exchanged online for goods and services. Since we know that currency is just a medium of exchange, this type of virtual or digital currency is just a new medium of doing transactions.
Just like the world, at some point in time, agreed that paper notes will be used…
…as currency, the same has happened with digital currency. A major pull of this sort of currency is the element of security. But there are many other reasons crypto is popular. In fact, Bitcoin, the world’s most popular cryptocurrency, gained about 300% in 2020, going past $30,000, up from $7,200 at the beginning of 2019. In March 2021 Bitcoin reached a record high of $60,000 when major giants like Tesla, invested in it, stating it was a good store of value against inflation. Not just Bitcoin, the same happened to many cryptocurrencies.
The reasons for the popularity of cryptocurrencies are:
Cryptocurrency is a decentralized digital currency, which means it’s one medium of exchange not issued by any bank or financial institution. These transactions can be done via cryptocurrency exchanges. Cryptocurrency has become so popular because of the ease of transfer. There is no need for a third party or a middleman for a cryptocurrency transfer. It is maintained by a peer-to-peer community computer network consisting of users’ machines or “nodes”.
Cryptocurrencies make use of blockchain technology, which is well known for security. Any transaction made for cryptocurrency can only be read by the sender and receiver as the information is encrypted. Anything entering the blockchain gets mathematically encrypted using a highly complex digital code set up on the network.
Cryptocurrency suffers from many disadvantages, which is why I don’t personally trade it. At least, not yet…
I DO NOT Trade Cryptocurrency
While there’s no denying cryptocurrency has its pros, the cons are significant enough to make me stay away. It’s a personal call I have taken for my portfolio, while some of my students have gone on to do well trading crypto. It’s important to understand the shortcomings that crypto has so you can make an informed decision on whether you should trade it or not.
Based On Speculation And Hard To Predict
I just don’t see it as worth my time and energy (yet). These predictions lack sufficient evidence and statistical support to back up their claims. Stock trading is based on logic and predictions based on past events. It has a basis to it. Stocks that we trade in are for actual companies that are expected to turn a profit. They consist of physical assets as part of their valuation, and you can figure out if a stock is valued correctly on market price or not using mathematics. History tells us a lot and statistics don’t lie. That is where my expertise lies and that is where I like to put my money and belief.
Crypto, on the other hand, is based on speculation and hype. Crypto trading is a lot like gambling, and I personally don’t recommend gambling with your hard-earned money.
Its origin was as a parody cryptocurrency created by software engineers Billy Markus and Jackson Palmer. This year it reached a market capitalization of more than $50 billion. The problem is that the value was skyrocketed by fans. It is a digital currency that started as a joke and is not a sustainable investment. As a matter of fact, the joke went a bit berserk this year thanks to Elon Musk and his tweets. A tweet by him drove the value of Dogecoin up by 7% on July 1. Anything suddenly catching the fancy of investors based on the influence of someone famous goes to show there’s no basis or logic behind it. It’s all hype and just a trend.
Trends may or may not last. As a trader who wants to create a long-term career, you should stay away from such hypes. They are just blips in the radar and you must look at the bigger picture. I stay away from crypto for the simple reason that the hype is created artificially by people, without any logic behind it. One tweet from a famous person can affect the movement in a big way. The hype is often way too dramatic for it to have any lasting impact. Dogecoin and other meme coins originally existed to have fun and not make investors money. It should remain that way, in my opinion.
Prices Too Low
The crypto market is also highly volatile and prone to crashes. In fact, it is known for its volatility. It might just be my experience trading stocks talking, but the concept of trading low-priced coins that are highly volatile does not seem engaging to me. Just like penny stocks cheaper than $5 aren’t really a great choice, crypto coins suffer from similar issues. High-risk with extremely dicey returns. The value of bitcoins can vary drastically in a matter of no time at all. Because of these reasons, slightly more expensive stocks are a better investment according to me, rather than low-priced coins.
Should You Trade Cryptocurrencies?
I know, it’s tempting to trade cryptocurrencies after all the hype you read on social media. But let me remind you, we must not believe everything we see on social media.
The ones who get rich quickly often also see their downfall quickly. Having said that, maybe you’re still curious about crypto and what it can do. After reading my reasons not to trade cryptocurrencies, you probably have a fair idea of whether you should. For me, not trading crypto is a personal preference. It might be the opposite for you. Maybe you want to dabble in it for fun. Maybe you want to invest in stocks long term and in crypto just for fun; as a gamble. That is completely up to you. If you decide to trade crypto, it’s worth mentioning that the strategies I teach in The Freedom Challenge work very well for crypto trading as well. As I mentioned earlier, some of my students have gone on to trade cryptocurrencies and have done well. The advice provided in my course is not just pertaining to stocks, it’s something that makes you a better trader overall.