Cryptocurrency And The Risk-Reward Rollercoaster

October 18
3:33 PM 2018

Cryptocurrency And The Risk-Reward Rollercoaster

In our current culture, with the news cycle constantly turning over, peoples' memories are becoming shorter and shorter. When it comes to long-term investments, people have a hard time sticking to their guns, since our accelerated way of living enforces constant activity. Legendary investor Warren Buffet, the father of value investing, made his fortune investing in undervalued businesses and then patiently waiting for the payoff.

The Patience Dilemma

Few people have the patience for this approach these days, and private investors tend to want high-risk, high-reward investments that will make them rich (or ruin them) overnight. Certainly, hedge-fund managers still need to find reliable places to put their clients' money, and this is the benefit of parking your money in a hedge-fund: the risk is hedged and you don't need to do anything - if, that is, you trust the management team handling the fund.

In 2018, if a hedge fund announced they were going to dump a bunch of their clients' money into the cryptocurrency eco-system, there would almost certainly be a mutiny. This is indicative of the risk-reward rollercoaster that investing in crypto presents.

Practical Applications/ Long-Term

While there are naysayers out there who insist that crypto is a flash in the pan, anyone who knows the full story of crypto and understands where society is heading in the 21st century can see that the attraction and application of crypto and blockchain will only grow as time goes on. Relatively speaking, we are still in the first phase of digital currency, and as such, there is a certain level of volatility that is to be expected.

The idea that such a sophisticated technology providing a secure, efficient platform for the transfer of money (amongst other things) would magically disappear overnight is a bit absurd, to be honest. For those who aren't interested in investing in crypto, Bitcoin, Litecoin et al. still represents a fast, cheap, hassle-free way to transfer funds and purchase goods. Furthermore, crypto is not tethered to any government or central bank, which, if you look at inflation scandals and the dubious practices of central banks, can be seen as a pretty huge pro.

Emergence of User-Friendly Platforms

Across the globe, digital wallets and online platforms to facilitate crypto transfers and exchanges are popping up. These services are not sketchy, dark-web operations - as some conservative pundits would have you believe - but well-run businesses that value transparency and accountability. The website in Canada even goes so far as to provide a comprehensive guide to blockchain and the various cryptocurrencies that run on its revolutionary electronic ledger. Many people out there have an interest in seeing that crypto crashes and burns so that the status quo may prevail, but having opened Pandora's Box, Satoshi Nakamoto has ignited a new way of thinking about currency that will very likely shape the future of the global economy.

Investors Beware

The moral of the story is: crypto's not going anywhere anytime soon. The volatility of the fledgling experiment makes it a wildly attractive investment for the adventurous, but until crypto achieves stronger traction and mainstream acceptance, it will remain a roller-coaster investment only to be ridden by those with strong stomachs.

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