I have been trading Cryptocurrency for a few months now. Like many, I have had my share of gains and losses. Cryptocurrency (referred to by some as "Digital Currency") is a very interesting phenomenon. Unlike traditional assets like Real Estate and Stocks, cryptocurrency is significantly more accessible, allowing even someone with as little as $100 to make a pretty significant return. As a consequence of its accessibility, there has been a huge influx new investors hoping to take advantage of this great opportunity. While there is no doubt this influx is a good thing for the Cryptocurrency community, there are some things that are very concerning with regards to many of these new investors. Today, I want to discuss what I believe is one of the biggest causes of concern in the community.
One of the biggest problems I, and most likely many others, have observed in the community is the frightening lack of knowledge in the subject of investing many newcomers portray. In many parts of the Cryptocurrency community, it is very common to see newcomers ask such questions as where to invest their own money and whether it is a good time to buy or sell a particular coin. These types of questions paint a very frightening picture, especially considering that some of the capital mentioned by those who ask these questions amount to thousands of dollars.
This problem is not just portrayed by newcomers asking such questions, however. The problem is also evident in the popularity of video and other content making such claims as a certain coin will make one rich very quickly. As we have seen in recent events, including the BitConnect fiasco, quite a large number of people lack even a basic understanding of investing principles. As a result, many of these individuals rely on "hot tips" from friends, and often strangers, instead of following a strategy or doing their own research before opening a position.
I believe one of the culprits of this problem is greed. It is this very human emotion that many ill-willed individuals use to deceive many less informed investors. But greed alone does not paint the entire picture of the situation the community finds itself in. It is greed in addition to the widespread sources of misinformation about the subject that I believe paints the entire picture of the problem we face today. When discussing the subject of Cryptocurrency, many sources in the media illustrate a false narrative of getting rich quick and how millionaires are minted overnight. This narrative could not be further from the truth. However, many newcomers that see this join the community with the mindset that they will easily get rich without much effort, as illustrated by the newer ending talk of Lamborghinis. While it can work in some cases, there is no doubt that this "herd" mentality in the community today has hurt quite a lot of people. Paired with the inadequate investing knowledge mentioned earlier, this mentality has resulted in many investors opening positions at all time highs in the best case, and losing everything to scams in the worst case.
Incidents like these do not only affect the investors involved. These types of incidents also give the Cryptocurrency community a negative image. Coupled with misinformation about the subject, many victims of these unfortunate circumstances will develop a negative bias towards the community as a whole.
The risk of these types of circumstances can be reduced if the community practices and encourages good investing principles. With the amount of shady coins in the market, the practice of good investing habits have never been more important. These habits are also not very difficult to learn. Even simple habits such as doing proper research and following a single strategy would prove very beneficial to many newcomers.
As it is, the Cryptocurrency community does its best to help newcomers get on their feet. However, I believe that we as a community can better help these new investors if we place more emphasis on educating oneself about good financial and investing habits. Even something as small as encouraging newer investors to have an exit strategy beforehand can be of great help in promoting a smarter and well inform community.
Cryptocurrency has presented us with a very rare opportunity to make great financial gains that is very accessible to even those with little financial capital. But even these opportunities come with a degree of risk. Through the promotion of good investing and financial habits, we can cultivate a better, and smarter, community that is able to benefit from the opportunities ahead while minimuzing the risks they undergo.
