Bitcoin is a hotter investment than ever these days. Worth just pennies when it was launched in 2009, a single Bitcoin now fluctuates between $7,000 and $11,000 today.
Bitcoin isn’t the only cryptocurrency that’s experienced a meteoric rise either. Other crypto investments like Ethereum, Ripple, Stellar, VeChain, and Binance Coin have increased greatly in value in recent years.
But despite the rise of Bitcoin and other crypto, many have compared these investments to gambling. This includes famed investor Warren Buffet, who doesn’t put Bitcoin in the same class as stocks.
“If you wanna gamble somebody else will come along and pay more money tomorrow, that’s one kind of game,” said Buffet. “That is not investing.”
Buffet may have done gambling a disservice by comparing it to Bitcoin. After all, there are multiple reasons why cryptocurrencies arefar riskier than casino gambling.
I’m going to discuss three reasons why playing the Bitcoin market is worse than casino games.
Fiat currencies like the Australian dollar, US dollar, euro, and the pound are regulated by the government. This installs confidence in fiat and makes people feel as if their money is safe.
Bitcoin doesn’t have this same backing, nor is it subject to regulation. Therefore, it suffers from a few related problems, which you can see below.
One of Bitcoin’s advantages is also one of its weaknesses: decentralization.
Satoshi Nakamoto, the alias of Bitcoin’s anonymous founder, created this cryptocurrency after America’s 2008 Economic Crisis. His motivation was/is to produce a worldwide currency that isn’t subject to the will of a central government or bank.
Bitcoin still lives up to this vision today. But the lack of regulation also causes problems in that governments aren’t involved.
Some people enjoy the lack of government and bank involvement. After all, it was banks that caused the 2008 Economic Crisis, and the US government bailed them out.
But other people aren’t so comfortable dealing with a digital currency that’s not regulated. This creates fears over having no recourse if your money is stolen.
Compare this environment to modern online gambling. Many licensed markets have opened up across Europe, and other continents like Asia, North America, and South America are working on doing the same.
Most people don’t equate gambling to safety. But at least these gamblers can take comfort in knowing that they’re doing so in a regulated environment.
If a major dispute happens in the UK, for example, the United Kingdom Gambling Commission is there to deal with the matter. Cryptocurrencies don’t have anything comparable at this time in terms of regulation.
Initial coin offerings (ICOs) have been huge in 2017 and ’18. The reason why is because one can invest a small amount of money before a coin launches, then hopefully get rich when the crypto takes off.
It’s easy to see why people are enthralled by ICOs when considering the cryptocurrencies that have seen big rises within the past few years.
Ethereum, which launched in 2014, is one project that has seen widescale success since its ICO days. The smart contract-based project is now the world’s second-largest crypto behind Bitcoin with a $61 billion market cap.
But for every Ethereum, there are dozens of bogus coins and tokens that don’t pan out. What’s worse is that some of these ICOs are outright scams.
The biggest ICO scam to date involved a Vietnam company that offered both Pincoin and iFan. Over 32,000 people invested a combined $660 million into these fraudulent cryptocurrencies.
Centratech, which became famous for endorsements by DJ Khaled and Floyd Mayweather, is another one of the biggest ICO busts.
This was billed as a Visa and MasterCard debit card service that would let people convert crypto into fiat. But things unraveled when two of the founders, Sohrab “Sam” Sharma and Robert Farkas, were arrested for cheating investors out of $32 million.
Now, this isn’t to say that the online gambling world doesn’t also have its black marks.
We need only recall the Ponzi schemes at Full Tilt Poker and the CEREUS Poker Network (Absolute & UB Poker) for evidence. These two poker operations went down with millions of dollars in player deposits.
But the key difference is that the cryptocurrency world has already seen dozens of scams within a short time period.
The thought of internet gambling may not immediately inspire confidence. But the average online casino is actually a safe place for your money.
Millions of gamblers deposit and withdraw funds from internet casino, poker, and sportsbook sites with no incident. The same can’t be said of some Bitcoin exchanges.
This isn’t to say that all Bitcoin exchanges are risky, with Binance, Gemini, and Kucoin proving reliable so far. But others have been complete disasters.
This includes Mt. Gox, which was once the world’s largest Bitcoin exchange. But Mt. Gox ran into serious trouble in early 2014 after 850,000 bitcoins (approx. $450m) were hacked from the site.
Over 200,000 of these bitcoins were recovered, and Mt. Gox founders have sold off others to try and repay affected customers. But this still remains the largest catastrophe among Bitcoin exchanges.
A more-recent disaster happened in February 2018, when Bitgrail announced that 17 million Nano tokens were hacked. This $195 million theft has still yet to be repaid.
Again, online casinos don’t have a perfect history in their two-plus decades of experience. But internet gambling sites have refined their security and banking processes over the years.
That said, the chances of a multimillion-dollar hack are much smaller with internet casinos these days.
I just covered some of the hacks and problems with Bitcoin exchanges. But the safety problems go beyond just whether your money is safe on exchange sites.
The Bitcoin world has been subject to a number of trading scams and market manipulation techniques. The most-common is pump-and-dump schemes, which see a group of people pour money into a specific cryptocurrency.
The plan is to rapidly increase the coin’s price and convince outside people to buy so they don’t miss out. But pump-and-dump scams are even more nefarious than this.
These groups include an inner circle that buys before others in the group. That said, only a small percentage of the pump-and-dump participants make big profits.
Bagholders include those on the outskirts of the pump and dump along with any outsiders hoping to catch a shooting star.
The lack of regulation makes Bitcoin markets subject to other manipulation problems that aren’t seen in regulated stock markets.
This includes wash trading, where an investor simultaneously buys and sells the same crypto from themselves to create false trading volume. Other investors then buy in under the assumption that the asset is in demand.
Most forms of online gambling aren’t subject to this level of manipulation. Internet gaming providers often get third-party lab testing to prove that they offer random and fair games.
Online poker is the closest thing to market manipulation in internet gaming. Players can collude with each other or use bots, which are artificial intelligence programs designed to play against humans.
But poker players in regulated markets don’t generally have to worry about these problems.
Volatility refers to how much short-term results tend to differ from statistical averages. And casino games like slot machines and video poker are more volatile than others.
But even slots and video poker have a tough time competing with the volatility of Bitcoin. You’ll see below just how crazy the fluctuations in Bitcoin can be.
Bitcoin has never been the most-stable asset in its brief existence. It was worth $120 in the summer of 2013, only to experience a sharp rise to nearly $1,000 by the end of the year.
The Mt. Gox hack caused a sell-off that continued for well over a year. Bitcoin was worth under $240 by the beginning of 2015.
This coin truly gained steam throughout 2017, when the price rose from $1,000 in January to nearly $20,000 by mid-December. The all-time high was followed by a sharp drop to under $8,000 by February 2018.
Bitcoin’s value has increased greatly over the years from an overall standpoint. But it’s hard to tell when the next boom period is coming.
After all, the Mt. Gox fiasco caused a bear market that lasted for well over three years. Could late 2017 be the most that Bitcoin is worth for the next few years?
One of the biggest problems after the bull market of late 2017 was an influx of impatient Bitcoin Investors. Many came in thinking that Bitcoin would continue taking off and making them rich.
What happened instead was a swift decline as experienced investors sold Bitcoin to take profits. This was followed by a decline that lasted throughout the first half of 2018.
I can remember being on Reddit during these months and seeing many new investors discussing how they hoped to turn a quick profit with Bitcoin. Instead, they were met with major disappointment.
If you want short-term profits, you’re better off gambling and hoping that luck goes your way. Bitcoin’s price history indicates that it’s subject to many drops and stagnant periods.
One thing that Bitcoin and gambling have in common is that you never know what’s going to happen in the future. But the difference is that many Bitcoin Investors think they can predict the future.
Far too many people use arbitrary signs to convince themselves that a market increase is right around the corner. For example, many investors convinced themselves in January 2018 that Wall Street bonuses would lead to an influx of cash.
Wall Street executives receiving their bonus had little-to-no impact on the market. Those who invested heavily under the assumption that this would cause an increase saw their money stay level at best.
This isn’t to say that there aren’t people who can make good predictions on where Bitcoin’s prices are going. But there are only a small percentage of investors who can do this with any consistency.
The average person is better off wagering on sports, where one can find more-predictive measures of success. Software programs help you spot reliable trends that can lead to profits.
This differs from Bitcoin, where the market is so unpredictable that even the experts miss the mark on a frequent basis.
The Bitcoin and stock markets share many similarities. You can use exchanges to invest in both, and the goal is to make profits on your investments.
But the actual process of investing in Bitcoin differs from traditional stocks. Furthermore, the general population has yet to embrace cryptocurrencies like they do stock investments.
The same is true when comparing crypto and gambling. Many people have come to accept casino games these days, yet they’re highly skeptical on Bitcoin.
You can see a few reasons why this is the case below.
Online gambling had a slow start when the first casinos were launched in the mid-1990s. Few people trusted the idea of depositing their money on these sites or even giving away their credit card details.
It also didn’t help that online casino games were poorly designed and lacked the functionality of today. The end result was a slow climb towards mass adoption.
Bitcoin is going through something similar today in that not everybody trusts this technology. Furthermore, the process of buying cryptocurrencies beyond Bitcoin is slow and cumbersome.
You can’t buy most crypto with fiat. Instead, you can only get them after purchasing the more-popular coins.
Here are the steps to buying the majority of cryptocurrencies:
Many people in the general population find this too difficult in comparison to regular stocks.Speaking of which, you can visit a single exchange site like Robinhood and buy stock with fiat.
Now let’s consider what it takes to deposit money at an online gaming site. The first step is to visit the banking section and make sure you can use one of the available payment methods.
Provided that the casino has a payment option you can use, the next step is to make the deposit. This is certainly much easier than having to use one currency to buy another currency.
Another drawback to investing in Bitcoin and other crypto is that you can’t research these projects like you would a company.
This isn’t to say that cryptocurrencies are void of aspects that can be researched. For example, you can look at the team behind a project, their vision, the white paper, and partnerships to see if you think the coin is legitimate.
What you can’t do, however, is research revenue streams and balance sheets. Cryptocurrencies don’t offer this information to investors.
This is especially the case with actual currencies like Bitcoin, Bitcoin Cash, Litecoin, and Nano, which are bets on future adoption, rather than profits and losses.
All cryptocurrency investments are still highly speculative due to the limited amount of information. Therefore, you must do a fair amount of guesswork on a project’s potential.
One common theme throughout this post is that Bitcoin hasn’t been around very long. In fact, this digital coin isn’t even a decade old.
Many other cryptocurrencies in the market are far younger than Bitcoin. This makes it hard to have much confidence in where the market is going as a whole.
It’s possible that crypto is as big as it will get. This is especially true if mass adoption never happens for Bitcoin and similar currencies.
More and more places are accepting Bitcoin as a form of payment. But it’s still hard to find many stores were you can buy bread and milk with bitcoins.
An investment in crypto is an endorsement that you think more industries and businesses will be using Bitcoin. But again, it’s no given that this will happen.
Gambling, on the other hand, is an established industry that’s been around for centuries. Even online casinos have been running for more than two decades.
What’s more is that you can easily find strategy and information on casino games’ house edges. This makes it easier for you to choose the most-beatable games and use the strategy that’ll help you win more money.
Many cryptocurrency enthusiasts think of Bitcoin as a strategic investment, rather than pure gambling. But I’ve presented a few reasons why gambling is a better option than buying Bitcoin.
The three biggest problems with buying Bitcoin include that it’s unregulated, volatile, and has yet to gain acceptance among the masses. This makes it hard to believe that Bitcoin is being downgraded when compared to gambling.
My take is that it’s currently the other way around in that gambling is given a bad name when compared to Bitcoin.
I’m not saying that this will always be the case. After all, anybody who purchased Bitcoin in the early 2010s and held on to their investment is a happy person right now.
Of course, the key is that you must believe in Bitcoin and be willing to hold it for years before seeing your investment pay off. Too many people look at cryptocurrencies as a get-rich-quick-scheme, only to be highly disappointed when they lose half their investment or more.
I implore you to take up online gambling if you have this mindset with Bitcoin. You’re better off playing a game like baccarat, which only has a 1.06% house edge and gives you a solid chance to win in the short run.
If you’re interested in purchasing cryptocurrencies as an investment, you can do a few things to reduce the volatility. These include properly managing your bankroll, diversifying, and having a clear strategy.
Much like a skilled gambler, you should figure out how much money you can afford to lose on Bitcoin investments. This isn’t to say that you’re going to lose your money, but rather that you should prepare for anything.
Diversification means spreading your investments around the cryptocurrency world and beyond. Don’t count out traditional investments like gold, stocks, and real estate Just because you’re really into crypto.
As for strategy, one of the safest for beginning investors is dollar cost averaging. This involves purchasing a set amount of assets at the same day/time of the week or month.
For example, you could buy $100 worth of Bitcoin every Monday at 5:00pm. This helps you manage the ups and downs of the market and also cut out the emotions of investing.
Again, Bitcoin isn’t for the faint of heart or those who want quick profits. If you’re not willing to wait on your Bitcoin investment, then head to an online casino and hope for luck to be on your side.
You’ll have a better chance of winning short-term money this way than by purchasing Bitcoin.
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