If you’re looking for a highly popular and exciting investment option, we’ve got one word for you: crypto. There’s no denying that investing in digital currencies can yield great returns. Bitcoin’s staggering rise which saw the asset transition from an overlooked project to a powerful virtual currency worth over $60,000 at one point, within just a few years, is all the proof you need of crypto’s huge potential as an investment venue. A lot of people got rich by investing in crypto at the right time, and that has prompted many others to go down the same path.
But it’s just as true that putting your money into an asset class that’s mostly known for its volatility and hasn’t been around long enough to reach maturity is also an extremely risky endeavor. And if you don’t have much knowledge about crypto’s turbulent history, it’s enough to consult the charts and look at Bitcoin’s price evolution or Ethereum fluctuations to realize that crypto investing is an incredibly unstable ground.
Since investing in digital currencies is a double-sided coin, boasting both opportunities and risks, and the market continues to expand with newer projects emerging all the time, its only natural for people to require a bit of help so they can make sense of what’s happening in the crypto space and navigate this intricate landscape with greater care and ease. Despite their rising popularity, cryptocurrencies are still largely misunderstood and most individuals don’t have the skills and knowledge to decipher them on their own.
That’s where financial advisors come into play. But can financial advisors provide the help you need when it comes to this type of investment, and do they even support the practice? These are the issues that we’re going to explore in this post.
Crypto between investing and gambling
Should crypto be treated as an investment or as a form of gambling? This is the question that has been on everyone’s lips ever since the asset took off and started gaining traction and recognition in the financial world. There are numerous articles on the internet addressing this topic with plenty of arguments on both sides. Volatility is the main reason why digital assets are considered a gamble rather than a viable investment. The technical indicators for crypto clearly show that this is one of the most volatile assets on the market. The lack of regulations and poor understanding of the technology behind crypto also make trading and investing in digital currencies highly speculative.
However, even though volatility incurs greater risks, it’s also the factor that allows for incredibly high returns that no other asset class can compete with. For example, stocks may have a track record of generating consistent returns, but crypto’s massive price swings can lead to much nigger profits in a shorter period of time. Besides, crypto isn’t entirely up to chance, as we can pinpoint most of the factors that determine its value. We also need to keep in mind that digital assets are still in their infancy and the price fluctuations they experience might calm down as the market matures and the regulatory landscape gets clearer. So, it might be just a matter of time until crypto becomes a safer and more reliable investment vehicle.
Where do financial advisors stand on crypto investing?
It’s pretty obvious that opinions are divided when it comes to crypto investing. But what do financial advisors have to say about it? First, let’s explain what financial advisors are and then we’ll discuss what they can do in relation to crypto.
Financial advisor is an umbrella term that designates any individual who has knowledge, expertise and experience in the financial field and is qualified to provide guidance and advice to clients on a variety of money-related matters, from investment management to tax planning and everything in between. Some financial advisors also have specialized knowledge of the crypto market, so they can provide valuable insights into the industry. But will they use their expertise to offer recommendations and advice regarding crypto investing? Probably not. That’s because most financial advisors don’t even consider crypto a worthwhile asset with real investment value. Many professionals in the field have a rather conservative approach and look at digital assets as a simple fad that’s not worth discussing. That makes them pretty skeptical about crypto’s investment potential. Others have very limited knowledge of crypto, so they can’t express any professional opinions in this respect.
Therefore, it’s highly unlikely you’ll ever come across a financial advisor that will explicitly tell you to buy, hold or sell a certain crypto asset. If anything, those who are educated on the topic and have a solid understanding of the crypto industry may lay down your options and tell you about the risks you expose yourself to if you choose to add crypto to your portfolio. An advisor’s role is not to promote or convince you that an investment venue is good or bad. They do however have the obligation to present clients with accurate facts and data and help them manage their funds and expectations. Their reluctance at providing advice in this area can be interpreted as a way to protect clients from the risk associated with crypto investments.
So, if you can’t find a financial advisor who’s willing to guide your steps as you walk on the winding path of crypto investing, where can your turn for help? You can always resort to reputable educational platforms to expand your crypto knowledge and gain a more in-depth understanding of the inner workings of the industry. Alternatively, you can follow renowned crypto experts and influencers such as Vitalik Buterin, Changpeng Zhao, Anthony Pompliano or Roger Ver who can help you keep up with the latest trends and developments in the market. And no matter what your investment plans might be, don’t forget that thorough research is always necessary before making any move.