Rapid increase in the price of Bitcoin and other crypto tokens over the last 12 months has led to a lot of people opening up to the idea of investing in cryptocurrencies to earn high returns over the next few years. Of course, cryptocurrency investments are inherently high-risk, and so people who are new to the industry should not think that these are fool-proof get-rich schemes that are bound to generate high returns for them no matter what. Due diligence is needed, as it is with every other financial investment, and there are even some who believe that crypto investing is similar to gambling. There may be some minor similarities, but there are quite a lot of differences between these two activities, and both of them have their own advantages and drawbacks which we will now layout for you to understand and judge.
The biggest feature of cryptocurrencies, that makes them so appealing and risky at the same time, is volatility. Crypto prices have gone through the roof when we consider the last 12 months or even shorter time periods such as the last three months or so, and this has been the biggest driver of the spectacular gains that many investors and crypto token owners have seen in their portfolios. Volatility, however, is a double-edged sword, and crypto investors have been burned by this previously, having seen a similar rally in the price of Bitcoin in 2017 followed by a huge crash in 2018, which wiped out more than half of the market capitalization of the token within a couple of weeks. Thus, this makes cryptocurrency investing inherently risky, even though crypto prices have stabilized to a large extent in 2021. However, this does not make it equal or similar to gambling. The risk in gambling comes from chance and randomness since the outcome of a dice throw or a spin of a roulette wheel is random and cannot be predicted. That is not the case with crypto investments, or any investment in financial markets, where there are financial statements, past records, and many more sources of information to base projections and predictions on. Of course, in both these instances, the investor or player, as the case may be, does have certain decisions in their control, such as where and when to invest, or when to fold, call or bluff in a gambling game.
In fact, it is quite interesting that cryptocurrencies and gambling are actually becoming quite interlinked. There are several online gambling sites that now offer cryptocurrencies as a payment option for players. Thus, this effectively means that players on these sites can play casino games with cryptocurrencies, and this is a blend of both investing and gambling which is interesting to consider.
Experienced investors can find interesting opportunities anywhere, with the crypto sector providing ICOs, or initial coin offerings, that are similar to listings on stock exchanges, for investors to consider if they want to be the first to a potential opportunity. These provide a great chance to pick up tokens for cheap, but it is generally advisable, especially for newer investors in the crypto space, to stick to older and more reliable cryptocurrencies that have a longer price history and more reliability, in as much as reliability can be found in the crypto sector.
Of course, investing in cryptocurrencies is similar to traditional investing in many ways, with a lot of the initial work being the same. Potential investors need to assess the reliability of tokens, their accessibility, uses, and price history, as well as volatility and other factors that can affect the price. That is not the case in gambling, where there is no way to assess what a potential return from a game can be, especially if you are playing with other people and not against a computer. This is the biggest difference between gambling and investing, in that gambling is based on randomness, luck and chance, with a little bit of skill involved as well, while investing, or rather successful investing, relies on correctly identifying opportunities and capitalizing on them, timing, and skill at identifying value. Both these activities have their drawbacks and risks, and can even be done simultaneously by the same person, but are definitely not equal.