Cryptocurrencies are one of the hottest commodities on the market today. There are initial coin offerings (ICOs) nearly every day of the week. Billions of dollars in venture capital has flowed into these financial instruments. However, in many ways cryptocurrencies are not like a stock or bond. Instead, they are more like a lottery ticket. Buying and selling cryptocurrencies means predicting numbers, making a strategy, and putting money at risk just like any sort of lottery system.
Excitement
Cryptocurrencies are as exciting as lottery tickets in some ways. They often come with an explanation and a story behind them. Like lottery tickets, an individual can craft a strategy surrounding their usage. Many individuals with lottery tickets like to try and research possible number combinations. They want to pick numbers that other people have not already picked in order to reduce the chances of having to split the pot with another individual.
With cryptocurrencies, there is more research performed. A cryptocurrency attempting to attract Wall Street investors may not be successful if it is started in Nebraska or South Dakota. In addition, an individual may learn that the founder of a particular cryptocurrency is related to a Wall Street banker. This connection may lead to venture capital funding that could cause the price of the cryptocurrency to skyrocket. Such potential leads to a considerable amount of excitement in buying, holding, and then eventually selling a cryptocurrency.
Total risk
Another shared attribute between lottery tickets and cryptocurrencies is the chance of losing an individual’s entire investment. A lottery ticket that does not win is basically a piece of paper. It has almost no intrinsic value outside of a winning combination of numbers. Cryptocurrencies can be similar in some instances. Many individuals buy new cryptocurrencies with the hope and expectation that they will rise considerably in value over time. They may have expert knowledge like Sean Seshadri or may have simply read about the potential of cryptocurrencies for a few hours before buying. But like lottery tickets, there are many cryptocurrencies that have a moment where their eventual value will be determined. If that moment is missed, there is a chance that the cryptocurrency will turn out to be worthless.
Chance for ultimate success
Cryptocurrencies have the potential to become worthless rather quickly. But they also have the potential to make an individual into a millionaire. There are a handful of cryptocurrency millionaires who have gotten rich off of buying and selling certain cryptocurrencies. This process often happens to burgeoning cryptocurrencies. Their wealth is determined by certain events that might considerably raise the price of the cryptocurrency for a very short period of time. These events may involve buy-in from investors or a favorable review. Once the price does jump up, an individual has to act quickly. A short delay could lead to an individual losing thousands of dollars.
Conclusion
Experts like Sean Seshadri argue that cryptocurrencies should not be the only part of an individual’s investment or retirement package. They are only one potential source of wealth. Just as individuals should spend their life savings on lottery tickets, they should not do the same with cryptocurrencies. However, cryptocurrencies can also be a part of a retirement portfolio and can hold the key to future wealth. Research and luck can both help cryptocurrencies just as much as they ever helped the holder of a winning lottery ticket.
Author Bio: Douglas Pitassi is a freelance writer and small business blogger.
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