It’s been a rough start to the year for the stock market. Between the COVID-19 pandemic and the subsequent global financial crisis, investors have lost a massive amount of money, which has many scrambling for safety. With the Dow Jones Industrial Average falling by 23% in March, it’s clear that the traditional approach of piling in on the market just before year-end isn’t going to cut it this year. Not for the first time in history, investors are looking for safe havens, and one place they seem to be flocking to is cryptocurrencies. As a result, the family vacation to Disneyland that you and your children were eagerly looking forward to may have to be postponed. But it doesn’t have to be! With careful consideration of the facts, you can still have fun but protect your savings from the clutches of a corrupt financial system.
The Digital Gold Rush
To be clear, financial scams involving cryptocurrency are nothing new. Unfortunately, many well-intentioned people get sucked into the schemes, thinking that they’re helping the less fortunate. You might have even heard of Ponzi schemes, in which early investors are paid off with the money from later investors. While a Ponzi scheme is always a scam, it tends to work for a little while before the inevitable collapse. But during the last few years, a new type of scam has arisen that relies on the growing popularity of cryptocurrencies rather than the fear of a collapse. And what’s worse, this scam isn’t limited to the digital realm!
Let’s start at the beginning. Back in 2017, the price of one bitcoin soared to $17,500, more than quadruple its price in 2016. At the same time, the price of gold plummeted to an all-time low. Naturally, many people thought it was a perfect time to enter the gold market, since it was obviously headed for a long-term decline. So they dumped their gold investments for bitcoin, and off they went. (For those who want to be explicit, buying bitcoin is technically the same as long-term investing in gold, and some people consider it a short-term safe haven asset.)
Since then, the price of bitcoin and other cryptocurrencies have both risen and fallen, but the long-term trend has been upward. And that means that, even now, someone who bought gold in 2017 and shifted their investment to bitcoin would still be ahead of the game. It’s easy to get excited about the prospects of high returns in a short amount of time, but such opportunities don’t last. Unfortunately, many people are missing out on the huge gains that come from owning cryptocurrency, simply because they don’t know how to value it or understand the risks. As a result, they’re paralyzed by fear, not excitement.
The Benefits Of Owning And Keeping Your Own Currency
There are multiple reasons why people should consider owning currency other than wanting to make a quick buck. First and foremost, you’re not at the mercy of a corrupt financial system that can change the value of your money at any time. Even during the height of the COVID-19 pandemic, which is causing many businesses and governments to close their doors, the value of the dollar didn’t fluctuate significantly.
An additional benefit of having your own currency is that you can purchase whatever you want with it. Sure, you might not be able to buy a house with a dollar, but you can definitely buy a coffee mug or a bottle of spirits. This is especially useful for those who travel a lot for work, since they can’t always rely on other banks to do the same for them. (Never, ever, trust a stranger who claims to work in an “international banking division.”)
The Dangers Of Getting Fooled Again
Many people have bought into the latest fad, thinking that it’s the same as owning gold. But it’s not – at least, not yet! One of the primary dangers of investing in a popular cryptocurrency is getting sucked into another Ponzi scheme. Just like with traditional investments, you’ll be tempted to join in the short-term greed, only to find out that you were had when the price inevitably dives. (Of course, this could also happen with traditional investments, but it’s less common because it’s not as easy to get sucked into a Ponzi scheme using a more obscure investment vehicle.)
If you look at the price history of many cryptocurrencies (including bitcoin), you’ll see that they’ve all gone through some serious price fluctuations over the years, and it’s often difficult to know where to put your buy or sell orders. When the price is going up, it’s easy to be optimistic and think that you’re making huge profits. But the truth is that you could easily be buying into a bubble that’s about to burst. The only way to ensure that you’re not getting fooled again is by learning from experience – by being your own best investment advisor.
Protecting Your Savings From Fraud
If you’re reading this article, I assume that you’re already aware of the risk of getting scammed by a so-called “investment advisor,” who is usually a person or group of people who, given your lack of experience, seem to know a lot about investments. In reality, they might have just seduced you with their knowledge or pretended to be your friend to get access to your money. (Never, ever, give your personal information to someone you don’t know or haven’t known for a long time. This includes your email address, bank accounts, social security number, etc.)
Since the price of bitcoin has risen and fallen over the years, it’s not uncommon for people to lose money, especially if they follow the herd mentality of the buying frenzy, jumping in at the wrong time with unrealistic expectations. If you’ve ever watched the famous TV show, “Penny pinchers,’” you’ll know what I mean when I say that there is often a lot more than meets the eye when it comes to these so-called “advisors.” You can easily get scammed by these people, and it doesn’t take a lot of money. All it takes is for someone to dupe you into giving them access to your personal information and, possibly, your money.
Fortunately, there are multiple ways for you to protect your savings from fraud. One of the simplest, yet most effective, ways is to buy and keep your own currency. As already discussed, the price of bitcoin and other cryptocurrencies tends to rise and fall, so if you’re planning to make a quick buck by selling your coin at the first sign of a dip, you’ll be doing so at a loss. In fact, if you’re going to lose any money at all, it’s usually the best course of action to simply exit the market and let the price take its course. Better to stay away, than to get involved and lose everything.
Risk Versus Reward
Many people make the mistake of thinking that all cryptocurrencies are created equal. But that’s far from true. While there are some cryptocurrencies that have maintained a relatively stable value over time, most have behaved rather erratically in the past, which presents a significant risk for those who choose to enter the market. If you’re looking for a way to make quick cash, you should certainly consider investing in one of the more established cryptocurrencies, such as bitcoin or Ethereum. But if you’re looking for a long-term investment that will appreciate over time, you might want to consider looking into Monero, Dash, or Nano, since they have the potential to appreciate significantly, given their current prices. (Check out CoinMarketCap for an idea of the current prices of the major cryptocurrencies.)
When you compare the long-term performance of the major cryptocurrencies to that of the dollar, it’s clear that some are far more stable and reliable. Although it’s difficult to compare the price of a cup of coffee to that of a complex, global market, it’s interesting to note that, since the inception of bitcoin, a single coffee purchase would now be worth more than a single day of sales from the S&P 500, which was originally established in the early 1900s.
The way I see it, this sort of comparison is rather like comparing the quality of a fine wine to that of a fast food restaurant. One is an exquisite experience, the other is just something to fill your stomach. In the end, it’s all about the tasting experience and how much you’re willing to pay for it!