Crypto Is Troublesome for Young Investors, Here’s Why
If there’s one thing people will remember about 2021… besides Covid-19, it’s cryptocurrency. This new technology has taken the world by storm, many professional athletes requested to be paid in this mysterious new currency. El Salvador even plans on building a city funded by Bitcoin. With all of this talk about crypto, the young tech savvy generation has bought into the hype. However this could spell disaster, and not for the reasons you would expect.
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Crypto vs Stocks
Unlike stocks, the value of a cryptocurrency is not tied to the performance of a specific company. In fact many cryptocurrencies are actually tied to other cryptocurrencies. This is a big paradigm shift, it means crypto investors are investing in a ‘novelty’ item that has value because lots of other people also want it. In fact many veteran stock investors such as Warren Buffet, have referred to cryptocurrency as ‘digital gold’.
However, when stock investors purchase shares of a company, they are staking their money on the performance of that company. Their investment helps to provide real, tangible value to other people. This is a very different form of investment compared to ‘digital gold’ such as Bitcoin. This is where problems begin to arise, especially for new investors. Many young investors are inexperienced, falsely believing that investing in crypto is the same thing as investing in stocks. When in reality, they are two very different forms of investment, and they should be treated differently.
Blindly Accepting Risk
As a new generation of investors seeks to profit off their investments, many are turning to crypto. Depending on who you ask, this could turn out to be a blessing or a curse. Since the crypto market is extremely volatile, many new investors will make the false assumption that stocks are equally as risky as crypto. This could not be further from the truth, and many young investors are accepting more risk than they‘re aware of.
With that said, many young investors don’t have the burden of a family or other expenses. Young investors often times are still supported financially by their parents. Which means, perhaps this is the peerfect time to take a big risk on crypto. There is no correct answer, but it is worth noting a crypto investment is inherently more risky than investing in stocks.
Stocks Are the Unpopular Choice
Crypto brings another potential issue to the table, especially among young investors. That is, crypto has become the popular investment choice, and causes young investors to overlook the potential of regular stock investments. This is especially troublesome, due to the fact that most stock investments take many years to generate a substantial profit.
Furthermore, young investors are being influenced by celebrities and entrepreneurs that tell them to invest in crypto. With platforms such as Reddit and TikTok, many young investors are taking advice from people who are not actually investment experts.
Crypto is Misunderstood
One final issue that young investors overlook, is they don’t fully understand how the technology works. Which means many young people are investing in a technology, and they have no idea how it works. There are a variety of misconceptions that new investors are led to falsely believe. Which could pose as a major hazard for the future of crypto.
One More Thing
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