I’d love to get rich, but I don’t think investing in crypto is the way to go – here are 6 reasons
Favorite holiday? Halloween. Favorite type of movie? I have a Shudder subscription. Favorite author? Stephen King is in my professional biography. Needless to say, it’s a scary season in my life 24/7. So when I first heard about cryptocurrency, I thought maybe the Crypt Keeper had finally decided to open a bank.
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I may have just dated myself as an older millennial. Still, one thing I haven’t done is tell you what cryptocurrency is and why I hesitate to invest my cold hard cash. I love all things money, but there are some things I dread. Cryptocurrency is one of them.
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What is crypto?
“Cryptocurrency is a broad term for digital tokens that exist only online and are typically not issued by a centralized regulatory authority,” Joe Cortez, editor of crypto and blockchain news outlet Gokhshtein Media told BuzzFeed.
Cryptocurrency (or crypto for short) is a virtual or digital currency backed by cryptography. Because of this, it is difficult to counterfeit. Cryptocurrencies rely on blockchain technology to disperse funds to customers and make a deposit. Due to the payout over an extensive network of computers and servers, cryptocurrency is not regulated by the government or major financial players such as the FDIC.
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So how is crypto different from our regular currency?
Common currency, primarily known as fiat money, is paper money that has been made legal by governments. So all those benjamins floating around in your checking account are worth something because the government says so.
Central banks, backed by the Federal Deposit Insurance Corporation (FDIC), issue fiat money. The FDIC ensures that if you as a customer have $250,000 or less in their bank, your money is safe. So even if the bank you use suddenly closes its doors, you will still get your money back.
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Unlike fiat money, the government has not issued any value to cryptocurrency, but private companies that rely on blockchain technology do. Entering the crypto market is also more accessible now than ever. Consumers hope that the digital tokens they buy will eventually be worth more tomorrow than they are today.
It is important to note that some people do as crypto for other non-investment uses. Some prefer to invest in what could be the next wave of technology. Some feel they can keep money off the grid, which is definitely an alternative to stashing cash under the mattress. For communities wary of government involvement or even those who think there should be less of it, crypto is a great option.
If you think crypto is right for your portfolio, don’t spend more on it than you can afford to lose.
I’m all about getting rich. My dream is to literally wake up every day, sign checks from my home office, and then go back to bed. But I’m not sure crypto is the right way to do it. And that’s why I’m sharing six big reasons why I’m passing on investing in crypto:
1. There is no regulation.
In March 2022, President Biden issued an order to convene various federal agencies to evaluate the various types of digital currency. He also asked agencies to consider what it would look like to create their own digital central bank. Creating a digital central bank will provide consumers with an alternative to the blockchain. Until then, the government lacked an official approach to cryptocurrency.
I am not surprised that the government has spent so long considering cryptocurrency regulation. It’s harder to care about the regulation of something you can’t attribute value in the traditional sense. Since the government is only considering what regulation will look like, my money is not backed by conventional funds like the FDIC mentioned above. I had been big angry if I woke up one day and my bitcoin was gone without a trace.
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2. It is more difficult to assess value than traditional investments.
When you value traditional investments, such as stocks, bonds and real estate, you know what to look for to see if it is an excellent addition to your portfolio. Usually with stocks you have historically accurate data on how well the company is performing. With real estate, you can consider factors such as the neighborhood, the school district and the current supply and demand on the housing market. You don’t have that yet in cryptocurrency. There is no data backed by a history of market performance or anything tangible. Cortez admits, “Unlike fiat, which is usually supported by a central bank’s monetary policy, cryptocurrencies can fluctuate in price based on many different factors, including utility, buying or selling.” As Carrie Bradshaw once said, “I prefer my money in my closet where I can see it.” I feel like I’m better off with shoes than invisible coupons.
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3. The first recession was toxic for me, like Regina George.
I’ve already mentioned being an AFAB millennial who lived through the Great Recession and what I’m doing to prepare for another one. Spoiler alert: It was rough.
Opportunities for growth that I was promised never materialized. My hours were cut, making it even more difficult to live paycheck to paycheck while in school. Once I earned my criminal justice degree, finding a career in my field of study was challenging. Many police departments and counties were on a spending freeze, making do with the employees they were able to keep. Even when I looked for another job, it was hard to find anything that would put me on the path to earning more. When the jobs came back, they all started at lower wages, which did not keep up with inflation over the years, especially now.
Add to that the fact that I already make statistically less as a Latina, I have had to catch up financially and quickly. I long for the stability that I haven’t had in years, and because of this I prefer traditional investment methods and working with established financial institutions that have been around for decades.
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4. I try not to let Joanne The Scammer manage my portfolio.
My friend Joanne called from her mansion in Caucasian Living and asked if I would be interested in investing in a new type of cryptocurrency, “Joanne”. I had to politely decline, but at the same time I wondered how easy it could be to fall for a cryptocurrency scam.
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Crypto scams are not new. There’s the famous “pig slaughter scam” where you fall for a down-on-your-luck lover in a faraway country and ask if you can send them money via crypto because they don’t have access to a traditional checking account. You have scammers hacking into people’s Facebook to share an investment opportunity with their friends. It’s easier to get caught than you think.
Think back to the release of the popular Netflix show Octopus game. While some of us were busy making red light green light popular again, others were buying Octopus game cryptocurrency.$SQUID was a coin released after the series premiere. Despite having no direct ties to Netflix or the creators, people bought into it immediately. What buyers didn’t know was that $SQUID was a scam known in crypto circles as a blanket cover. Once the funds were drained and gone, the site was immediately pulled. Those hoping to cash in on the show’s popularity were left in the cold. They would be better off playing Red Light, Green Light like the rest of us.
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5. It’s fleeting, like your future mother-in-law.
Just after peaking in value in November 2021, the most popular crypto type, called bitcoin, crashed in May 2022. Once worth $68,000, the popular coin plunged to a value of $20,000.
As inflation rose across the country, cryptocurrency evangelists began pulling their money out of the crypto market and other investments deemed risky. As investors began liquidating their accounts, the price of crypto began to fall. The algorithmic stablecoin became worth less than the US dollar, starting a trickle-down effect.
While some economists have argued that the market will return to what it once was, I have trouble swallowing that. Because crypto is so new, nothing has happened in the past compared to the latest crash. While I think it will come back eventually, I don’t want to put money into something that may or may not recover.
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6. My old lady cat sanctuary needs my traditional retirement accounts funded first.
Because of my hot mess in my 20s, I’m further behind on saving for retirement than I’d like to be. Although I want all the cats I will own to choose Fancy Feast, I don’t want to eat it too.
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When you get serious about your retirement investing game, you know that when you invest, it’s for the long term. As much as I want to retire tomorrow, I know it will take years for my investments to grow to a comfortable level. That’s one of the reasons why I and others don’t worry when a bear market happens, like the one going on now. Make sure you invest in your retirement before jumping into the next crypto craze. If you have a 401(k), make sure you get that employer match. If you’re looking at a Roth IRA, make a significant investment before dumping the rest into bitcoin. Make your future self proud and make sure you take care of yourself first.
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