If youâve had fantasies about choosing the color of your new Lamborghini from your cryptocurrency investments, youâre not alone. Weâve all seen the sensationalized headlines of new traders who became millionaires from investing in Bitcoin, Dogecoin, and others by buying in early. But donât be fooled – many of these overnight success stories are the result of a gamble. This might seem like an attractive strategy, but what most people donât see are the millions of people who lose money thinking this way. In this article, weâll cover the 6 differences between investing vs, gambling in cryptocurrency so that you can make smarter decisions when managing your .
Investors are Educated On âWhatâ and âWhyâ
The first difference between a cryptocurrency investor and a gambler is that investors are educated on the cryptocurrency they are purchasing and why it exists. Truly understanding a cryptocurrency means taking time to learn and understand each cryptocurrency project youâre going to put money behind. If you have no idea what your chosen cryptocurrencyâs usage is, you are most likely taking a gamble on it.
One thing you can start doing today is to understand the high-level purpose of the cryptocurrency through the official website and whitepaper. You should ask yourself if the defined use-case seems sustainable and valuable to society or a specific problem. A good example is Ethereum. Ethereum has many use-cases that solve real-world problems in the Decentralized Finance space and beyond.
Any coin that has no real value and based on some random tweet you saw is probably not a safe bet. I love animals as much as you, but I would stay away from any coin with a name like Floki Sheep, Shiba Kitty, or Corgi Coin.
Investors Diversify; Gamblers Go âAll Inâ
And that brings us to our next point on investing vs. gambling, which is diversifying your investments. If you just canât stay away from that cute, trending, animal-inspired crypto project, then you need to be thoughtful about how much youâre willing to gamble on it.
And yes, buying into anything without a valuable use case is a gamble. Meme and animal-inspired coins are high-risk investments that youâre trading purely on speculation.
Diversifying your crypto portfolio can prevent a lot of heartaches. Many gamblers will throw all of their cash into one coin, and then wonder what happened when that coin turns out to be a rug pull. A smart investor will buy into multiple coins with valuable technologies and teams behind them. Diversifying your investments helps to minimize your risks, and smart investors are all about reducing risk.
Investors Minimize Risk
Speaking of minimizing risk, letâs talk about taking profits and setting up a Stop Loss. There are a few different ways of taking profits depending on your investment strategy, which will be covered in another article.
A stop loss is simply a way to minimize your risk by triggering an automatic sale when your cryptocurrency falls below a specific price. For example, if you purchased 1 was at $30,000, you might set a Stop-Loss at $25,000, which helps ensure that if the market is falling quickly, youâll only lose around $5,000. There are different types of Stop-Loss triggers you can set, and most of the exchanges, such as Coinbase, support these. If you arenât setting up triggers for your investments, then youâre taking a gamble if the market decides to fall quickly.
Investors Plan Ahead; Gamblers Chase the Market
Even the thought of a market crash might trigger some anxiety. Weâre humans. That means weâre vulnerable to emotions. However, a gambler will typically chase the market, overtrade, and make biased decisions. An intelligent investor will follow their investment strategy, have patience, and not rush the process. If youâve invested in cryptocurrency long enough, youâre going to endure some losses at some point. A gambler will typically get emotional and throw money back into the market to try and recoup losses which usually turn out to be illogical trades.
Another difference between investing vs. gambling is investors will take a deep breath and focus on their risk management, opening high risk-to-reward positions to cover those losses.
Investors Donât Leave Money On the Table
Itâs always a smart decision to not leave money on the table. If youâve just started your cryptocurrency investment journey, weâve created an up-to-date list of the major exchanges and the offers they are giving away right now for signing up. All of these exchanges are competing for your money as cryptocurrency is gaining adoption. You can deposit as little as $100 and get free stocks and crypto from using the links provided in that article.
Investors Think Of Their Crypto Portfolio As A Business
It can also be helpful for some people to think of your investment portfolio as a business and take each trade very seriously. Successful business owners are strategic in their investments and cash flow and allocating their cash because they care about the business’s long-term success. If youâre thinking of cryptocurrency as a slot machine or casino game, then youâre most likely gambling away your hard-earned cash. I like a good casino game now and again too, but this is short-term thinking. If you are looking at it this way, be prepared to gamble only what youâre prepared to lose.
The Bottom Line
Trading cryptocurrency like a smart investor will help you get one step closer to having that new Lamborghini vs. gambling away your hard-earned cash! Itâs easy to get caught up in the fantasy of getting rich quickly from the media headlines we see each day, but remember, these success stories are typically the result of gambling. What we donât see, are the majority of people who lose money or get scammed from a cryptocurrency project that seems âtoo good to be true.â I hope you enjoyed this article on the 6 differences between investing vs. gambling. Let me know your top investment tip in the comments!