4 Reasons I Don't Invest in Crypto
by Maurie Backman | Updated July 17, 2021 - First published on June 9, 2021
A lot of people are jumping on the cryptocurrency bandwagon. Here's why I'm not.
I've never been the type to follow trends. In high school, whenever my friends got together to discuss the latest TV show, celebrity, or fashion, I usually lurked in the corner or stayed home and just read a book. As an adult, I'm not very different, and I'm also the type to stay off the internet when it isn't necessary to do my job. Despite the growing popularity of cryptocurrency, I'm not interested in buying it right now, even though it's super trendy. Here are some of the reasons why.
1. I don't fully understand it
On a basic level, I get what cryptocurrency is -- digital currency you can trade or use to buy things where it's accepted. I also understand that you store it in a digital wallet, and that there are specific exchanges where you can buy it. But on a deeper level, I don't fully get what makes cryptocurrency gain or lose value, and the specifics of why certain coins are better than others (aside from the fact that they're perhaps more well known and therefore more widely accepted). As a general rule, I never buy a stock if I don't understand how the company behind it makes money -- so as an extension of that rule, I think I need to stay away from crypto until I learn more about it.
2. I'm not convinced it will become widely accepted for payment
Though a growing number of merchants take cryptocurrency as a means of payment, for the most part, you still can't buy things with it. I can't, for example, march into my local supermarket and cover my grocery bill with crypto. Nor can I use Bitcoin to fill up my car at the gas station. Until I see a broader use for it, I'd rather steer clear.
3. The taxes behind it don't work for me
When I acquire a dollar, then spend it, I don't get taxed on that dollar -- but if I buy cryptocurrency and use it, I could be subject to capital gains taxes if the currency has increased in value. I feel I already pay enough taxes, so I don't necessarily want to invest in a manner that will add to my tax burden.
4. It's volatile
There's no such thing as a risk-free investment. Even so-called safe investments like bonds can lose value if the companies behind them go bankrupt. Any time I invest my money rather than put it into a savings account, I accept the risk of a loss at some point. And since I routinely invest in stocks, I'm no stranger to temporary losses in my brokerage account. But while stocks can be very volatile, so far, from what I've seen, the cryptocurrency market is subject to even wider swings. I consider myself to have a somewhat healthy appetite for risk, but I don't know that I have the stomach for cryptocurrency investing.
The Ascent's picks for the best online stock brokers
Find the best stock broker for you among these top picks. Whether you're looking for a special sign-up offer, outstanding customer support, $0 commissions, intuitive mobile apps, or more, you'll find a stock broker to fit your trading needs.
Cryptocurrency may be a great investment opportunity for some people, provided they know and understand the risks. But I'm just not a fan, so I don't intend to invest in it anytime soon. Granted, I could change my mind if the market becomes more regulated (which could be a good or a bad thing) or if my investing strategy, finances, or goals shift. But for now, I'm staying away.
About the Author
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Maurie Backman has no position in any cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Bitcoin.