A modern and popular alternative to the stock market, cryptocurrency and NFTs are emerging currencies that can also be used to grow money over time. Both types use blockchain technology as the pillar of their systems, which traces every exchange to prevent hacking. Unique benefits like this draw in eager investors and lead some to believe these currencies will become mainstream in the future. But whether trading cryptocurrencies and NFTs for fun or investing large chunks of money, the risks of financial loss can be parallel to gambling. Understand how cryptocurrency and NFTs work and what to be cautious of here.
The Rise of Cryptocurrency
Cryptocurrency, often simply called crypto, was introduced in 2009. Bitcoin was the first type available and was widely viewed as a radical concept. Cryptocurrency has since taken off with more than 8,000 types, or coins, and hopeful investors consider it an alternative to standard money.
Rather than being sourced from one entity or authority, cryptocurrencies are supported by computers all over the world through a distributed ledger, which saves transaction information and displays changes for everyone in the system to see. Cryptocurrency also facilitates quick, low-cost money transfers — a benefit over regular money, with fund transfers that can sometimes take several business days.
But there are downsides as well, which make investing in cryptocurrency riskier than traditional investing. Since coin prices often change drastically in short periods of time, the cryptocurrency market is unpredictable. If you make a large profit one day, your balance could drop to near-zero the next. While you can speculate on how to trade, it’s impossible to know how a coin’s value might change in the future.
What are NFTs?
Short for non-fungible token, NFTs are another new form of digital currency and can be purchased using cryptocurrency. These are original assets that are non-fungible, or non-exchangeable, meaning they’re one of a kind. While NFTs are digital in structure, they’re still considered original creative work — having one is similar to having a certificate of ownership for a collectable object. The asset can be shared and reproduced, but the owner of the NFT has a token with a code identifying it as the original, securely stored in the blockchain system.
The first NFT was created in 2014, and like cryptocurrencies, NFTs have since gained traction with nearly $11 billion traded during a single quarter in 2021. This concept has potential to extend into different types of digital spaces, but skeptics know NFTs could also become obsolete.
Gambling Versus Investing
With cryptocurrencies and NFTs, it can be hard to see the line between calculated investments and short-lived fun with harmful effects. Discussing which cryptocurrencies have potential and selecting trades with friends can feel like a strategic form of investing, sometimes clouding the reality of financial risk. For some, trading these currencies can turn into a problem.
People who regularly trade cryptocurrency and do sports betting have a high likelihood of gambling and disordered gambling, so it’s important to pay close attention to how you invest and why. If you find yourself investing large amounts of money due to friends’ advice or sudden market changes, it might cause fluctuations between short-term success and major financial loss. This approach is risky and much like gambling since you ultimately have no control over the outcome. Making spontaneous decisions, investing lots of money in a single coin and spending excessive time doing so are all concerning signs to look out for.
On the other hand, smart investing involves a careful recognition of risk and a long-term approach, using money that’s been set aside for this purpose. To keep your cryptocurrency and NFT investments under control, budget a small amount that you know might disappear completely. If you have extra money to spend on entertainment or something personal, cryptocurrency and NFT spending should fall into this category. These markets are new and though they’re gaining traction now, they aren’t guaranteed to stick around long-term.
Gambling is complicated, and sometimes it can throw people off balance. If you feel like your cryptocurrency or NFT investing habits are financially problematic or affecting your wellbeing, help is readily available.