The Crypto Craze: Is Crypto a Good Investment?

Is crypto a good investment

Just about everyone in the U.S., even non-investors, has heard of crypto. In many ways, they are shaping up to be the future of currencies worldwide. However, for the time being, many treat crypto as investment vehicles more than their day-to-day payment. So, the question is, is crypto a good investment? The short answer is no, but let’s discuss why.

Crypto Basics

Crypto is meant to replace traditional currencies with the promise of greater security and anonymity. A primary mechanism for this is what’s called a blockchain. It is more than likely that you have heard this buzzword a few times regarding crypto.

In simple terms, think of a blockchain as a set of transaction logs that independent volunteers constantly verify to verify for accuracy. The logs are blocks, which are verified, locked from editing, and strung together to form the full blockchain containing all transaction history.

The purpose of a blockchain is to offer far greater security than a standard transaction log. These can be far more easily faked since if the master copy is altered, the true history is lost.

Crypto is currently available through brokerages, very similar to the stock market. You purchase a portion of a coin just like buying a stock share and hoping it goes up. 

Different Crypto

Another integral part of crypto is that there are many different crypto. When you think of crypto, you likely think of Bitcoin or Ethereum. These are the most common and widely used crypto at the moment. However, there are more than 12,000 crypto available.

The specifics of a crypto vary by specific coin. For example, Metacade is a crypto based on earning Metacade tokens through playing and reviewing games in a virtual video arcade. Another is Ripple which focuses on facilitating quick, cheap international payments. Each one has its promises, goals, and features.

The different features of each crypto contribute to whether the crypto will increase in value in the future. As of now, Metacade is on presale for $.02 per coin, and Ripple is at $.38 per coin. This may sound small, but what is important is the percentage increase. If Metacde becomes worth even just $.04, that is a 100% gain.

The other thousands of crypto focus on everything from enhanced security, to greater efficiency to reduce its carbon footprint, to trading virtual real estate. These focuses will no doubt expand in the future.

Crypto vs. Traditional Currencies

Crypto are vastly different from traditional fiat currencies. Fiat currencies are not backed up by a physical commodity such as gold but instead by the government that issued it. For the U.S., this is the dollar. The U.S. dollar is not backed up by any physical commodity, only by the promise of value by the U.S. government.

The difference is that crypto is not backed or controlled (more on that later) by any individual organization. Instead, the value of crypto is determined by the value investors give it based on supply and demand. If there is plenty of Bitcoin, the supply is high and demand relatively low. So, the value of Bitcoin would drop.

Speaking specifically on Bitcoin, its value is also heavily determined by what Bitcoin represents to investors. Bitcoin was the first available crypto, and this made it the coin people think of when they think of crypto. This representation led people to associate Bitcoin with fighting centralized currencies and future growth.

The primary issue with the lack of centralized support is that there is little to no protection if theft does occur. With a bank account, you can be refunded if anyone fraudulently withdraws funds from your account. However, this is not an option with crypto. There is no entity responsible for reimbursing you.


What eases the concern for this scenario is that crypto is very focused on security. Crypto primarily uses blockchain technology to assure greater safety than traditional banking. Though it has a short history compared to conventional banking, blockchain technology has proven more challenging to crack than anything before. 

If security is still a concern, there are even options called “cold storage”. This is where you store your crypto offline on a physical storage device. The goal is to keep your funds off the internet, which is more vulnerable to hacking. The tradeoff is the convenience of your funds being accessible at all times online.

Ease of Use

The difference that affects everyday people the most is that crypto is only accepted as payment in some places. Crypto promises to use it to pay for anything from a hot dog to a car, but this is a slow shift. 

Currently, the most common way to pay with crypto is using a payment method that supports but isn’t focused on crypto. For example, PayPal allows you to hold Bitcoin and use it to pay for things, but you aren’t directly using a crypto wallet to pay for the item.

This method is an acceptable method of payment for the time being. But in the long run, if the only way to use crypto is through these services, most people would rather hold dollars than crypto. For people to widely decide to hold onto crypto for payment, it is going to have to be natively accepted by businesses. It is likely businesses will eventually make this change since crypto has a lower fee (1%) compared to traditional credit cards (2-3%).

Price Volatility

When you have a dollar bill, you feel confident in its value. The most it is likely to change is 8% in a year due to inflation. However, if you are holding your “cash” in crypto, your holdings could be worth nothing in the next year.

These fluctuations are widespread in crypto. Each year, nearly 1,000 crypto fail completely. This gives you about a 7.7% chance of randomly investing in a coin that falls to zero in a year—not even including the thousands of other coins that decrease dramatically in value, even if not to zero.

This fluctuation is something that most people aren’t used to dealing with typically. It is also dangerous for people without a high income or a lot of savings to cover a catastrophic drop.

The exceptions to this volatility are coins that track fiat currencies. For example, the coin USDC tracks the US dollar one-to-one. Coins like these are meant to be less volatile options for crypto investors, though missing out on the high upside potential of traditional crypto.

Is Crypto a Good Investment?


High Earning Potential

The same potential that a crypto has to decrease, it has to increase. As of the day of writing, SingularityNET (ticker AGIX) has risen by 26.05% in the last 24 hours. This is an outrageous increase for such a short period.

These returns can even happen on a longer time scale. In 2021, Gala increased by 32,750%. Investing a single dollar into this coin in early 2021 would have resulted in $327.50 by the end of the year. 

More well-known examples include Dogecoin and Bitcoin. Dogecoin has had many jumps due to publicity from Elon Musk, including a 20% jump in 24 hours due to a tweet. Bitcoin has commonly had 10% fluctuations when Elon indicates a positive future outlook on the coin. 

For some investors, the prospect of aiming for 10% annual market returns isn’t enough. This is where crypto coins come along with promises of massive 50x gains. Though this hardly ever comes true, the chance is still there.


As mentioned, crypto are not centralized like traditional fiat currency. Instead, crypto are backed by blockchains maintained by nodes. Nodes are computers volunteered to lend computing power to verify blockchain additions in return for small amounts of the related coin. This verification process yields far more secure results than traditional methods.

Part of this security is due to a lack of necessity for trust. A user doesn’t have to trust or know anyone else to trust a transaction. If someone alters their ledger, the network will immediately reject it since it doesn’t match everyone else’s. 

Decentralization also means stealing coins through the holding institution is impossible since there isn’t one. If a criminal robs a bank, they can steal physical cash. With no centralized facility for crypto, there is no “bank” to rob. This eliminates one method of theft.

Finally, decentralization reduces the likelihood of a catastrophic system failure. Traditionally, if a bank’s networks went down, the bank itself would be down. With a decentralized system, there are no core resources to rely on. As long as someone is verifying the ledger, the system keeps going.

Efficient Transactions

Traditional long-distance transactions have many issues. There may be a lag due to verifying funds or high fees. This can make international payments very difficult and costly.

An advantage of many crypto is quick and cheap transactions for anyone. The transactions are fast because they can be immediately verified through the blockchain. There is no waiting for a bank to communicate with another bank, trust it, and release the funds. It is also much cheaper because there is less overhead. A bank needs to hire staff and maintain facilities, whereas crypto usually only has fees for the portal you perform the transaction on, such as PayPal.

These efficiencies become more critical as world trade becomes more global. As online communication becomes more common and accessible, more people from different parts of the world want to trade goods and services. Traditional banking systems make this process expensive in terms of time and fees. Crypto could be the solution to this growing problem.

Evolving Technology

The kinds of currency we are used to are stable. The dollar isn’t likely to undergo any significant changes in the near future. It will function and be traded nearly how it is now for the foreseeable future.

Crypto is currently in its infancy. Crypto, and the technology behind it, such as blockchain and farming, are constantly evolving. These evolutions can significantly improve over previous iterations, even in the same coin. A current mediocre coin could become a hit tomorrow with the correct update.

This sort of update is currently underway on the second most popular crypto, Ethereum. Ethereum is undergoing an update to Ethereum 2, promising improved efficiency, speed, and scalability, rolling out over the next two years. Once this rollout is complete, Ethereum will likely be a very different coin than it is now.

As crypto receive more attention and funding, these improvements will only become more frequent. These improvements are good news for investors, as improvements usually lead to price increases.


If you invest too heavily in a single asset, your portfolio will be significantly affected by fluctuations in that asset. This is where diversification comes into play. Proper diversification shields your portfolio from being too greatly affected by a single asset. 

Diversification applies to any investments. Diversifying in real estate means having multiple assets so that if one area or asset falters, your other assets are there to cover. Crypto is a natural addition to this diversification.

Crypto may swing wildly, but its swings are not likely to sync up with real estate or stock market fluctuations. This means they can balance each other to generate a well-rounded portfolio. Professional advice says to stick to 5%, 10% max, of your portfolio invested in crypto. This will provide access to potential gains but protection from large drops.



A big reason for holding on to money is to save it and know that you can rely on it in the future. Whether this is an incredibly stable bank account or a reliable investment account, you can count on it being there. However, it isn’t the same story with crypto.

You can’t rely on a set of funds that can disappear at a moment’s notice based on a single person’s tweet. Within minutes of Elon Musk tweeting that Tesla would stop accepting Bitcoin as payment for vehicles, the coin dropped 5%. Large coins such as Bitcoin and Ethereum are routinely seeing 10% drops in a single day due to unpredictable news.

This extreme volatility makes it impossible to depend on crypto. Though short-term investing is always risky, crypto takes this to a new level. This volatility makes investments incredibly risky.

An essential fundamental of investing comes to mind. If you make a 50% gain, you only have to drop by 33% to break even. However, if an investment such as crypto decreases by 50%, which is entirely possible, you now need a massive 100% gain to break even. In short, recoveries are much more challenging to achieve than losses to break even.

High Fees

Most crypto has relatively low fees as they don’t have to travel through traditional banking or credit card networks. However, fees can add up in other ways for crypto. Namely in the form of environmental fees related to crypto mining.

There are many resources out there detailing crypto mining. In short, crypto mining is used to maintain the blockchain. This process requires a lot of processing power, which requires a lot of electricity. This high electricity usage is a significant contributor to greenhouse gas emissions from electricity production.

Crypto companies are charged high environmental fees to compensate, and they pass these on to the investor. Using some crypto, such as Ethereum, can involve incredibly high fees. This varies greatly by crypto, so do your research.

Unpredictable Futures

There are volatile investments that are still predictable. For example, investing in Apple individually is riskier than investing in the S&P 500. However, Apple is still a stable-enough company that you can make reasonable predictions. Such as it not dropping to zero in the next year.

The same goes for the majority of companies on the stock market. This isn’t to say you can predict exact movement or gain/loss, but you can feel confident in not losing everything.

Crypto is the flip side of this coin (pun intended). There are many coins, each with advantages, publicity, and ownership. Not to mention the unpredictable future of crypto as a whole. Which kinds of coins will prove to be the most useful? Will they be more widely accepted, understood, and traded? So many unanswered questions make it impossible to know what will happen.

Evolving Technology

Yes, this was listed as a pro, but hear me out.

As mentioned before, coin evolutions can significantly improve the coin, leading to increased popularity and price. However, changes can also have unintended consequences. Bugs and mistakes happen and can be catastrophic to a coin.

If an update has unintended consequences on a coin, the public’s trust in that coin could be irreparably damaged. How would you feel if you lost a large amount of money that is unretrievable due to decentralization due to a vulnerability added during an update? That is far more serious than your iPad force-closing apps periodically due to an update.

The worst part is that you have yet to learn when these issues could crop up. An update could be a home run or a massive fail. There is no way to know except to wait and see. This factor makes it tough to trust investing in coins through an update.

Lack of Historical Data

One of the things that make the stock market a safe investment is historical data. This data can be used to make plausible predictions about how the market will react to certain events. We can look back 100+ years and see how the market has responded during world wars, recessions, booms, and just about every other occasion.

If a recession looms, we can look back to see how much the market tends to drop and how long it takes to recover. This data can be used to make educated decisions on how to proceed. This is something we can’t do with crypto.

The first crypto, Bitcoin, was founded way back in 2009 and was first traded in 2010. Not only is this not a very long time, but we don’t have significant trade volume to look back on during this time. We can’t reliably base the trades of hundreds of millions of people off of several thousand people.

When it comes to predicting how crypto will react to, say, a recession, it is a coin toss (pun intended, again). As more and more data is gathered, this con will vanish. But for now, it is a huge factor.

Bottom Line

Deciding whether to invest in crypto is a nuanced decision with many variables, many of which are complete unknowns for now. However, with the information available now, crypto is too risky of an investment to be worthwhile.

At best, crypto can be a valuable way to invest a small amount of money with the goal of diversification and hoping for a 50x return. At worst, it is a money pit where investors suffer for many years while crypto matures. Treat it as the wild west of investing with high risk and high reward.

Evan from My Money Marathon

Evan from My Money Marathon

Hey, my name is Evan. I am a personal finance blogger passionate about bringing beginner
investors into the stock market world. Go here to read about my story, from knowing
nothing about investing to being well on my way to financial independence.

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