Beginner's Guide to Crypto Pt. IV: Risk vs. Reward

Today I'll be helping you determine whether or not cryptocurrency is too risky of an investment for your portfolio.

Isn't Cryptocurrency a risky place to store my wealth?

Any emerging market is going to be riskier than established markets. It would’ve been risky to be one of the firsts to invest in Google, Amazon, Microsoft, or Apple, but if you told someone you had an opportunity to get in on the ground floor and skipped it, they’d call you an idiot now. On the other hand, no one would pat you on the back for investing in Cisco Systems at its ATH (77$ in 2001, $38 in 2017). The crypto markets are still in the Wild West phase – many will vanish or be useless, but a few will succeed and be a solid investment. This isn’t a theory, this is the reality.

An interesting news story out today concerns the co-founder of Ripple being more rich (at least temporarily) than the creators of Google. That isn't me trying to suggest this means Ripple is established and proven and will be as valuable as Google, but rather helping others understand that there is enormous speculative valuation going on in the crypto realm. If you're daring, take advantage. But know you can lose everything.

Your last post said there were numerous issues with Bitcoin. How is it worth it for me to put money into this?

If you're even thinking about putting money into Bitcoin, then you know why it could be worth it for you: some people say were at the peak of a bubble, others say the value could go to $50,000, $100,000, $250,000, or even $1,000,000 for every Bitcoin. Admittedly, seeing how it hasn't been able to break the $20,000 range, these numbers seem like a bit of a stretch to someone like you or me - this doesn't mean these analysts are wrong, but it does mean you have to keep your ambitions and hopes in check.

Be aware that Bitcoin is the Ford Motor Company of cryptocurrencies: they made the scene and remained the only player for years. This gives them first mover recognition and accolades, but the world shifts faster and faster these days. In the past month, Bitcoin has seen it's marketshare finally begin to slip under 50%.

Now, just because Ford isn’t the biggest (or only) car company in the world, doesn’t mean the company has zero value or doesn’t still make quality vehicles – they’ve simply seen their marketshare decrease as competitors flooded in. This is what's happening with Bitcoin, but instead of taking fifty years for the product to lose market dominance, it took less than ten. Again, keep this in mind when thinking of which cryptocurrency to dive in, and which one is best for you.

There are thousands of coins in the ethos, the main players currently being: Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and, to a lesser extent, privacy coins like Dash and Monero, or cheaper, faster, more centralized alternatives like Ripple. Every coin brings something to the table, and also takes something away. Ethereum is largely considered a developer-friendly coin, Litecoin has been termed, “the silver to Bitcoin’s gold”, and Ripple is working with banks to utilize its nodes and networks for faster transactions. To understand why any of these factors may be important to you, you’ll have to research what matters to you.

Wait, so what's the deal? Is it worth it for me to throw money into Crypto?

I am by no means an expert, nor will I ever claim to be. This is not written as a shill to get investors to buy into coins I believe in, or into the crypto marketplace at all. Investments and purchases are exceptionally subjective, and require any investor to assess what kinds of risks they are willing to take. If you’re 95 and living Social Security check to Social Security check, you’d be doing yourself a disservice to invest in cryptocurrencies. I’d almost recommend buying lottery tickets instead.

But no, please don’t do that, either.

If you're young and have extra cash lying around that you'd be willing to lose, invest away!

Always remember: only put as much money into cryptocurrency as you'd be willing to lose. Don't torture yourself by over investing in a volatile market. Don't mortgage the house because you think some crypto coin will go up 1000%. Don't sell your kids college fund for Bitcoin. These are all horrible, horrible ideas.

Be careful when investing, and be extra careful when investing in speculative, emerging markets.