Should You Be Investing in Cryptocurrency or Gambling with It?

by Jim Beviglia
on November 12, 2018
15

Minute Read

Cryptocurrency causes a lot of debates these days. It seems like it divides people among the true believers and the staunch skeptics. In fact, you can also find a schism even within those who are largely for it, as there are those who want to invest in it and those who would prefer to gamble with the digital coins.

It is a fascinating debate, one that will likely say more about you in terms of where you come down on the issue than it will about cryptocurrency itself. After all, the coins actually are malleable enough to work quite well for both investors and gamblers. That’s not bad, considering that they were actually created to be a kind of substitute payment system.

In the case of gambling, you can make a case that you are far better off funding your online gambling exploits with cryptocurrency than anything else. After all, the inherent qualities of the coins dovetail nicely with what gamblers want out of their experience. They’re fast, they’re secure, and they’re private.

Investors have a pretty good argument as well. The coins have already risen in value a great deal from when they were first instituted. There are enough of them around that you can easily diversify, and the coins haven’t even come close to their full potential usage, which means they have a lot of room to grow as an investment.

As you can see, it is a tough dilemma, as the arguments on both sides are pretty strong. In this article, we will try to present you with all the pertinent information you need to know about cryptocurrency, for novices and more experienced folks alike, as it pertains to both gambling and investing. At the end, you might not be completely ready to make a decision, but at least you’ll be armed with the foundational knowledge about the topics when you do make that call.

Cryptocurrency Facts

Let’s start at the beginning, because many people only have a vague notion about cryptocurrency from hearing about it second-hand. Others might feel like it’s too hard of a concept to grasp, especially if you’re a little technophobic. So, let’s spread out some of the facts so you can have a basis for understanding both cryptocurrency investing and cryptocurrency gambling.

  • Cryptocurrency is digital currency. It began with the founding of Bitcoin about a decade ago, when a bunch of developers wanted to create a way to pay each other digitally. They also wanted to keep third parties like banks and credit card companies out of the picture.
  • Cryptocurrency is driven by blockchain technology. A group of so-called “miners” compete to verify each transaction so that there is no way the transaction can be tampered with or retracted. Each transaction is also recorded digitally so that there can’t be any double payments or other mix-ups.
  • Cryptocurrency is fast and cheap. Because there isn’t an intervening organization verifying every little transaction, bureaucratic fees and delays are essentially eliminated. Those paying with cryptocurrency might be charged a small fee to process the payment, while those receiving cryptocurrency funds simply have to possess a digital wallet to accept the payment, which is settled almost instantaneously.
  • Cryptocurrency is private. No personal information needs to be exchanged between parties when dealing with cryptocurrency coins. In addition, only the cryptocurrency involved in the transaction needs to be put at stake, unlike how credit and bank card accounts are exposed when you are using those entities.
  • Cryptocurrency is unregulated. The fact that there is no organization overseeing cryptocurrency offerings is both one of its greatest benefits and greatest flaws. It is wonderful how it puts personal finance back in the hands of individual. But it also means that there is a target on cryptocurrency, and it makes governments and financial institutions suspicious of it.

To wrap this list up, let’s also shoot down some myths about Bitcoin.

  • Cryptocurrency is not illegal. You can get yourself a digital wallet right after reading this article and start buying and selling coins. In fact, governments, banks and the like are now trying to figure out how they can get in on the act, since there is a realization that cryptocurrency is here to stay.
  • Cryptocurrency is not Bitcoin. That is to say, it’s not only Bitcoin, which was indeed the first digital coin. Bitcoin gets a lot of the headlines and is the most expensive and popular coin on the market, but there are many other coins which have appeared in its wake, making for a robust selection for investors and users.
  • Cryptocurrency is going away. There is no doubt that cryptocurrency values have taken a hit in the past year after they skyrocketed, led by Bitcoin in 2017. But the fact that the coins are becoming adopted more and more each day by big organizations and companies, not to mention financial institutions, is a sign that bigger things are ahead, possibly in the near future.

Explaining Cryptocurrency Investment

Now that we know what cryptocurrency is and isn’t, we can begin to assess where it stands as both as an investment property and a tool for online gambling. When it comes to investing, many people have a hard time understanding how the coins can work in that manner. That’s especially true when they see how the value of the coins often swings wildly in a very short manner of time.

Of course, all currencies, such as the Dollar and the Pound, change in value. That’s why there is such a thing as the foreign exchange market, where investors trade one currency for another in the hopes that the one they acquire will rise in value against the other. When you trade in your home currency to use a foreign currency in another country, you are also participating in this principle.

But cryptocurrency is a much more volatile instrument, with rises and falls in value that make it something like stocks, albeit without underlying companies behind the coins in many cases. Much of that is due to the relative newness of the coins, as it has been barely a decade since Bitcoin was created, leading to a short sample size for investors. In addition, the polarizing nature of cryptocurrency leads to big price swings on practically every piece of news, positive and negative, about the coins.

Let’s take a look at some of the advantages of investing in cryptocurrency, before coming back and looking at the drawbacks that exist as well.

Advantages of Investing in Cryptocurrency

Extreme Growth Potential

You might not think this is so because of the fact that prices have plateaued since Bitcoin’s meteoric rise pulled the whole market up with it in 2017. But there are signs everywhere pointing in the direction of cryptocurrency’s continued ascension, both now and in the long term. Chief among these are the fact that saturation for the coins is still at a relatively low level.

Even though it might seem like everyone knows about Bitcoin and other coins like Ethereum, Litecoin, Dash and the other top ones on the market, there are still relatively few people who are either using or investing in them. Considering that many experts feel that there will come a time in a not-too-distant future when these coins will essentially replace the traditional system of sending and receiving money, you can understand how there is still plenty of room for the coins to grow. Imagine buying the coins relatively cheap today and watching how high the value grows as that rise occurs.

Many Choices

Again, this comes down to the fact that Bitcoin is far from the only player in the market. First of all, there are Bitcoin imitators like Dash and Bitcoin Cash that serve essentially the same purpose. The only difference is that they claim to serve that purpose of an online, peer-to-peer, no-third-party-involved monetary system in a cheaper, faster, more efficient manner than Bitcoin currently does.

Then there are the coins following in the path of Ethereum. Ethereum was one of the first coins to realize the possibilities of using the blockchain technology for something more expansive than paying for things. Hence their use of smart contracts and decentralized applications that encourage entrepreneurship all over the place.

It is much like the internet boom in the way that different sectors are forming. You can choose the sectors that interest you and which you feel have the best potential. And you can get in on that while the ground floor is still within reach.

Long and Short-Term Prospects

You can often find different camps among cryptocurrency investors. On one side are the holders, those who hoard away their crypto coins for the day when all of the lofty predictions about the coins come to fruition. Then you also have the active traders, who go at it like day traders do with stocks, looking for arbitrage opportunities even on an hourly basis.

Your own temperament will tell you which is for you. Maybe even the best way to go about it is to also include the actual using of the coins in your equation, since there are many ways to benefit from the coins’ practical applications (gambling being one of them.) In any case, cryptocurrency investing comes in all shapes, sizes and strategies, so you won’t ever feel hemmed in should you get involved in it.

Disadvantages of Investing in Cryptocurrency

You have to be clear-eyed whenever you deal with investing money. On that note, there are definitely issues that cryptocurrency needs to overcome in terms of being a consistent investment property as a whole. Among those are:

Volatility

Some people just can’t handle the radical shifts in prices that certain cryptocurrency coins undergo on a daily basis. Watching your funds skyrocket and disappear isn’t for the faint of heart.

Regulatory Intervention

It’s become a common theory even among the truest believers in cryptocurrency that the best way forward includes regulation, since that will clear the path for investment firms and banks to dump huge money into the sphere. Yet many people feel that, when that day comes, cryptocurrency will lose what made it so special and, in turn, much of its value for everyday people.

Failed Enterprises

Earlier, we compared this era in cryptocurrency to the early days of the internet. If you call those days, you’ll remember all the businesses that went under (and took investors with them) when their big ideas faltered. That can easily happen as well with the new companies flooding the cryptocurrency market who are begging you to invest in their coins.

Cryptocurrency Gambling Basics

Any kind of investing is a risk, no matter what anyone tells you. And so, in that regard, cryptocurrency investing and cryptocurrency gambling have something in common. When you’re gambling, you might be a bit more explicit about those risks that you’re taking, but, in either case, you’re putting a lot on the line.

As mentioned above, cryptocurrency coins are, in many ways, the ideal payment system for gambling websites. There are four things which really stand out when you fund your gambling with crypto, and they are:

  1. Speed: Quick settlements of cryptocurrency transactions are crucial when it comes down to dealing with gambling websites. On the one hand, you can get your deposits in quickly so you don’t have to miss out on a betting opportunity. In addition, the withdrawal process, which can sometimes be drawn out by these sites that don’t want to let go of your money, is streamlined as well.
  2. Privacy: Do you want the whole world to know about your gambling exploits? With cryptocurrency as your funding method, you don’t have to reveal any of your personal information. That means your gambling can be done in anonymity.
  3. Security: When you enter in a bank card or credit card number at a gambling site, you run the risk of that information being compromised and having all of the funds in your accounts put at risk. Using cryptocurrency, only the amount that actually goes to your deposit need be revealed. All of your other coins can be held in storage in an offline wallet.
  4. Freedom: No credit card company or bank can put a hold on your assets or dissuade you from using cryptocurrency. Your funds are completely your own, to do with what you choose. If that includes gambling, so be it.

On top of all this, you also have to realize that gambling sites will actively court you to do business. Why? Well, they want to be a part of the world of cryptocurrency as mush as you do. Not to mention that they won’t have to deal with credit card processing fees when you use crypto.

As a result, they will offer you bonuses to sign on that might even be richer than they would offer to those using traditional methods of payment. For example, they might provide a percentage boost to your deposit. Or they could provide some VIP perks to really spice things up with the more cryptocurrency that you put into play.

Types of Online Gambling Sites That Accept Cryptocurrency

We are at a point in time where the majority of established online casinos include some form of acceptance of cryptocurrency coins. Among these are:

  • Online Sports Books: Imagine being able to bet on your favorite teams and sports without dipping into your credit card accounts. If you have cryptocurrency, you can. Most of these sites allow you to wager on all types of sports, including horse racing and international events.
  • Online Casinos: Many people love the action of gambling in a casino but hate the hassle. Online casino sites can bring you all of your favorite slot machines, video poker, table games, and more. And a growing number of them have a wide range of cryptocurrencies listed as ones they will accept as payment.
  • All-Purpose Gambling Sites: If you can wager on it, these sites have it. These are perfect for the gambler who likes a little bit of everything. Cryptocurrency initiatives have found their way into many of these all-purpose sites.

One other thing we should note in terms of cryptocurrency gambling is the possibility of gambling on the Ethereum network. As we stated earlier, Ethereum allows people to create all kinds of applications, using Ether, the native coin of Ethereum, as the currency. Gambling applications are very popular on the network.

If you do gamble through Ethereum, you are essentially adding another layer of protection for your funds. Since the bets are made on a peer-to-peer basis, you never really have to park your coins at any time with another entity, as you would if you were using a traditional website. The only concern with these applications is that most are still quite new and you might not be able to get all the amenities and varieties available as you would with a normal site.

Disadvantages of Gambling with Cryptocurrency

Just as we did with cryptocurrency investing, we also have to look at some of the drawbacks with gambling on cryptocurrency. They include:

  • Changing Value: As we have demonstrated, the values of cryptocurrency can change at any moment. If you put a certain type of coin into a gambling site and that coin suddenly surges in value, it won’t be you who benefits from it. That’s why it’s a good idea to set only a certain amount for gambling purposes.
  • Less Choice: We stated earlier that there is a great demand for cryptocurrency users by gambling sites. But not all sites that have made that switch just yet. And those who have might not yet accept payments by some of the up-and-coming coins (Bitcoin is your safest bet), thereby limiting your options.
  • Tax Confusion: You do have to claim significant winnings from gambling websites on your yearly taxes in most jurisdictions. That can be difficult to figure out when you are dealing with cryptocurrency. It might require you to hire someone specifically for the task, which can cut into your winnings.
  • House Edge: Even though there might be temporary lulls, it seems like the trajectory for most cryptocurrency coins is heading upward over the long haul. When you are dealing with gambling websites, you are at a disadvantage because of the house edge that is involved in most gambling websites. You’ll need great savvy and luck to keep that cryptocurrency from dwindling away.

Why Choose?

Here is the thing about this whole issue: It doesn’t need to be an either/or sort of thing. In fact, if you are nimble enough, you can use some cryptocurrency for investing, some for gambling, and still have a little left over for day-to-day usage. The key is knowing which coins work for which purposes.

If you are thinking of investing in cryptocurrency, you can do so relatively cheaply if you do some scouting. Practically every day, some new business or initiative raises money by holding an Initial Coin Offering, or ICO. Since cryptocurrency favors retail investors, you will have first crack at these coins, unlike the Initial Public Offerings of stock which tend to go first to institutional investors.

By choosing these coins wisely (admittedly not an easy task), you have the opportunity to buy in at a relatively low price and cash in if the coins do well. For long-term investing and coins that you plan to hold onto, however, it’s probably best to stick with those coins that have proven track records. These coins have a much better chance of surviving in the long run after the trendiness of newcomer coins have worn off.

In terms of cryptocurrency gambling, you can simply check the best gambling sites, and see if any of them offer cryptocurrency. Once you find out, you can purchase them accordingly. Perhaps you can even trade other crypto coins that you already own for these specific coins via a coin exchange.

Position Sizing with Cryptocurrency Gambling and Investing

Once you have the coins all in place, think about the concept of position-sizing. Maybe you want to have half of your coins in your investment portfolio and the other half working for you in the gambling sphere. The key is to periodically check to see if your funds are still being allocated properly in this manner.

For example, should you come upon some big gambling winnings, you might want to take some of that and purchase some more coins for your portfolio. By the same token, if some of your investment coins hit a surge in value, look to sell some of it off, take the earnings, and add to your gambling deposit until you’re at that 50/50 balance. Doing this will ensure you don’t get too overexposed one way or the other and should keep all your cryptocurrency funds moving in the right direction.

Conclusion

The worlds of cryptocurrency investing and gambling need not be mutually exclusive. You can find ways of keeping both ideas in play. If it comes down to a one or the other choice, however, it all depends on where you feel most comfortable risking these funds.

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