In the past decade, cryptocurrency has exploded in popularity. Nearly half of all people between the ages of 18 and 34 invest in crypto. Even older Americans are getting in on this new financial fad—4% of investors ages 65 and over hold some crypto. Despite the popularity of digital currency, I’ve decided not to buy any for a few reasons. Here’s why I don’t invest in crypto and prefer traditional investment vehicles like mutual funds.
Crypto Is Too Risky
Investing has risks, and there’s always a chance you can lose your money. Even bonds, which are considered relatively safe investments, can go into default. But experts agree cryptocurrency is more volatile than the stock market.
Crypto undergoes extreme price swings and it’s often hard to estimate the true value of each coin. A company’s stock price mirrors its performance and projected future earnings. But crypto prices are driven by more nebulous factors, like a coin’s popularity, news coverage, and investor perception.
Although investor perception affects the stock market as well, emotions seem to influence crypto even more. For example, the price of bitcoin tends to shoot up or fall based on what Elon Musk says about it in his tweets. I don’t know about you, but I don’t want my investment returns to depend on one tech mogul’s opinions!
I’m also not sure crypto could bounce back from a major recession. We have lots of evidence that the stock market rebounds after crashes. But bitcoin hasn’t gone through nearly as many downturns, so I’m not confident in its longevity. Only time will tell, which is part of why I’m holding off on investing in crypto.
Family And Friends Had Bad Experiences
Many of my friends and family have had bad experiences with crypto, which has also turned me off of it. My sister was inspired to invest in crypto after hearing from a coworker that she made $50,000 on bitcoin. My sister tried to get in on the ground level of new coins to turn a profit but ended up losing about $2,000 trading crypto.
About 62% of people who buy crypto believe they’ll get rich from their investment. But becoming a crypto millionaire requires a lot of luck and financial know-how. Even if you’re an experienced trader, you can still lose money because the crypto market is so volatile.
I can’t stomach the risk involved in trading crypto, so I stick to safer investments like mutual funds.
I Want To Prioritize Tax-Advantaged Accounts
Right now my partner and I aren’t maxing out our 401k because we’re focusing on paying off our home early. Once we’re mortgage-free, we plan on maxing out our 401ks and opening up Roth IRAs. We won’t consider buying any alternative investments like crypto until we’re fully utilizing those accounts. I think it’s important to make sure you’re taking advantage of the tax breaks and employer match 401ks offer before you branch out into other investment vehicles.
Crypto Is Inconvenient
The final reason I don’t invest in crypto is that buying it is inconvenient. You need a digital wallet to be able to buy crypto. If you lose your private key or your wallet becomes corrupted, you could lose your holdings. Your crypto can also be stolen by hackers. Criminals made off with nearly $2 billion in stolen cryptocurrency in 2020 alone.
Not all exchanges offer the same coins and trading pairs, which can make trading crypto difficult. And although crypto is a currency, most retailers don’t accept it. So you can’t really use it to buy anything and need to exchange it for fiat currency first.
For all of these reasons, I prefer to invest my money in safer, more predictable assets like stocks, bonds, and mutual funds. But I’m not ruling out cryptocurrency entirely, so maybe I’ll change my mind and start trading it in the future.
What do you think of cryptocurrency? Let me know in the comments section below!
Read More
7 Things I Never Spend Money On
I Want to Move, But I Can’t Afford To
These Are The Best Side Hustles in Illinois
Come back to what you love! Dollardig.com is the most reliable cash-back site on the web. Just sign up, click, shop, and get full cashback!
Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.
Comments