Betting On Crypto: An Adventurous Gambit

By  //  January 3, 2019

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It takes a certain type of personality to ride the dragon of high-risk investing. The classic risk/ reward ration that is taught in first-year investment analysis courses has held true for as long as betting on assets and equity has been a human occupation.

It takes a certain type of personality to ride the dragon of high-risk investing. The classic risk/ reward ration that is taught in first-year investment analysis courses has held true for as long as betting on assets and equity has been a human occupation.

Whether you’re just trying to make a little extra on your income, or gunning to become the next Warren Buffet, it’s important to understand your own capacity to tolerate risk.

Traditionally, the risk-averse have bet on things like government bonds, which typically have a growth rate of two or three percent per year, versus a volatile equity investment, which would ideally have a return of about 15 percent.

That said, savvy investors can sometimes make 10 times their money (aka, a ten bagger) or more if they hit the jackpot. The downside, of course, is that for every ten bagger you may need to throw away a small fortune on similarly risky assets that crash and burn.

This past year, the federal reserve of the United States was preparing to raise the national borrowing rate significantly for the first time since the 2008 financial crisis, however, in light of a market that has turned rather bearish (at the time of writing), it looks like the rate may have to stay put.

This is relevant because when borrowing rates go up, bond returns go up, drawing investors with a moderate risk tolerance away from the equity markets.

As such, whether you’re an investor who likes to play it safe or a risk-loving adventurer, the end of 2018 is an extremely confusing time. For those who have invested in cryptocurrency, or are seriously considering it, this confusion is even more difficult to navigate. In the remainder of the post, we’ll break down the current state of crypto as an investment.

One reason that crypto is so difficult to regulate is that people can’t agree on whether it’s a commodity or a currency. The fact that it is ‘mined’ paradoxically suggests that it is similar to gold, oil or coal, though it has no physical form – you can’t fuel a car, feed a fire or make a necklace out of it.

One Important Distinction

One reason that crypto is so difficult to regulate is that people can’t agree on whether it’s a commodity or a currency. The fact that it is ‘mined’ paradoxically suggests that it is similar to gold, oil or coal, though it has no physical form – you can’t fuel a car, feed a fire or make a necklace out of it.

Anyone who is keen to learn how to sell Bitcoin as a commodity would certainly want to understand that its price volatility can, at times, make the decision to view it as a currency complicated. However, considering the price of Bitcoin (at the time of writing), crypto may look like a brilliant investment, considering its previous point of resistance (20k per coin).

Banks & Other Big Fish

While more than 75 banks are adopting blockchain technologies on a trial basis, it is unclear whether or not it will be permanently integrated into the infrastructure.

At the same time, crypto merchant banks and exchanges are popping up all over the world to service the high demand for crypto trading and offer consultation services to fledgling crypto companies. The global markets are currently in a precarious position, with the future looking cloudy – same for the crypto market.

The global trading market has a relatively established pattern that has developed over a hundred years, crypto’s behavior has no established precedent, thus, it is currently an adventurous gambit for cowboys and adventurers.    

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