With cryptocurrencies so much in the news, you might be wondering if you should invest in them. But “invest” may not be the right word – because, in many ways, cryptocurrencies, or “crypto” for short, are more speculation than investment.
But what’s really the difference between a speculator and an investor? Probably the main factor is the differing views of time. A true investor is in it for the long term, building a portfolio that, over many years, can eventually provide the financial resources to achieve important goals, such as a comfortable retirement. But speculators want to see results, in the form of big gains, right now – and they’re often willing to take big risks to achieve these outcomes.
There’s also the difference in knowledge. Investors know that they’re buying shares of stock in a company that manufactures products or provides services. But many speculators in cryptocurrency don’t fully comprehend what they’re buying – because crypto just isn’t that easy to understand. Cryptocurrency is a digital asset, and cryptocurrency transactions only exist as digital entries on a blockchain, with the “block” essentially being just a collection of information, or digital ledgers. But even knowing this doesn’t necessarily provide a clear picture to many of those entering the crypto world.
In addition to time and understanding, two other elements help define cryptocurrency’s speculative nature:
Volatility – Cryptocurrencies are…
