Sat Nov 09 2024, by Tyler Gardner

3 Compelling Reasons to Avoid Investing in Cryptocurrency

I'm Tyler, a former financial advisor and portfolio manager. Now I make financial content for free so that you don't have to pay for it.

Reason 1: It's Not an Investment

First and foremost, cryptocurrency is not truly an investment. It has no cash flow and no underlying physical assets. When your only hope is that someone will buy it for more than you did, that’s known as the greater fool theory, and you might just be the greater fool.

Reason 2: It's Not a Store of Value

Secondly, consider how you define a store of value. Any asset that can gain or lose $30,000 of value within a week certainly doesn’t meet my gold standard. This kind of volatility undermines its reliability as a store of value.

Reason 3: Correlation with Stocks

Finally, cryptocurrency is now almost perfectly positively correlated with stocks. The main reason we diversify our portfolios is to benefit from lower volatility through non-correlated or negatively correlated assets. However, as illustrated in the 2022 market downturn, stocks and crypto moved in lockstep, adding substantial volatility and risk without providing true diversification.

If any of this is helpful, please like and follow. I'll keep working to get you one step closer to where you need to be.

Source