Despite growing adoption from institutional investors and governments worldwide, many still perceive crypto as a get-rich-quick scheme and a medium of exchange for criminals.
Based on survey data published by Pew Research Center in October 2024, approximately 63% of Americans express little to no confidence in the reliability and safety of current methods for investing in, trading, or using cryptocurrencies.
While this remains a highly speculative asset class, with most altcoins and tokens being outright scams, Bitcoin and a handful* of altcoins are legitimate investments.
* Which ones? Time will tell, but Ethereum is still part of this past, despite ETH’s mediocre price performance in recent years.
Many fail to distinguish between investors and gamblers, still choosing to lump everyone into the second category.
Today, we’ll explore eight major differences between those who invest and gamble in crypto.
1) Obsessed with quick gains vs long-term vision
The early days of crypto have come and gone. Many would agree that 2017 was the last year when it was still possible to make astronomical gains from most crypto projects in a matter of months.
Yes, this was still possible in 2020 and 2021, but to a much lesser extent.
This was partly due to the heavy dominance of retail investors, which accounted for over 80% of trading volumes and circulating market caps, with very little influence from smart money.
Fast-forward to today, and the tables have quickly turned, especially with the advent of spot Bitcoin ETFs in the USA since January 2024.
While you can still achieve 100x gains in months, this is far less likely and is most likely due to luck and getting on the hype bandwagon very early, unlike the massive gains from BTC, ETH, LTC, and XRP in 2017.
Many yearn for the good old days when the space was still niche, and, best of all, very few KYC AML regulations compared to now, which are essentially mandatory for most exchanges and custodial providers.
But we’re no longer early, so it’s time to be patient and play the long game.
2) The amount of research (or lack thereof)
Buying into something because a random crypto influencer dropped ‘trust me, bro’ vibes isn’t going to cut it.
Mind you, there have been some larger YouTubers who have also been guilty of shilling certain tokens (secretly or otherwise), so don’t assume that the bigger names in the space always know what they’re talking about.
As a bare minimum, you should look into a project:
Tokenomics: The schedule for token releases, a.k.a. token emissions, the size of the largest wallets, and who controls them (Bubblemaps is a good starting point).
— Wallet statistics: How many unique users have started holding a coin/token in the past hour, day, week, month, etc. Moralis provides some of these analytics for free.
— Major Partnerships, Updates, and News: Who are these blockchain projects partnering with? Don’t be fooled by the number of partnerships; quality matters more than quantity, especially in this case.
— Unique or innovative use cases: How does this project differentiate itself from competitors, particularly in a more developed and competitive landscape than previous bull cycles?
— Social media following and how project founders interact with and update their fans, i.e., prospective investors.
— Transparency and communication with its audience.
Whitepapers and lightpapers are still useful resources to help you gauge whether or not a project is legit, but be aware of those plagiarising others to give the impression of legitimacy.
Those who use crypto for gambling will mostly focus on the coin age and hype score. Many in this category tend to gravitate towards newer tokens and often ignore BTC, ETH, and other established cryptocurrencies, believing they’ve “missed the boat” in these assets.
3) No vision, no exit strategy
If you fail to plan, you plan to fail.
Not having a predetermined strategy for taking profits can be very costly, especially if you need the money or plan to re-enter the market when it becomes bearish again.
Many crypto gamblers wing it and are too optimistic when one should be cautious. More on this later.
However, this can be a double-edged sword. Being too conservative when we’ve just started another (phase of a) bull cycle can lead to lost opportunities.
Rational investors (including skilled, well-equipped day traders) have a plan; they put emotions aside, take profits as the market becomes volatile, and wait to reinvest when significant drops occur.
Mind you, timing this is easier said than done, and often requires years of experience, hundreds, if not thousands, of hours of research, and navigating at least two full bear and bull cycles in crypto to familiarise yourself with the entire process.
Ultimately, you need to be comfortable with your decisions and take profits (or activate stop losses, where applicable) based on your risk tolerance.
This leads me to my next point.
4) Buy and hold vs day trading
Aside from experienced and highly knowledgeable day traders, most people will lose money doing this.
The stats vary (considerably), but they all show the majority of people in the red after a year of trading.
I consider those who jump into crypto trading without understanding margin calls and stop losses to be gambling with crypto, not investing.
While trading with bots could be more helpful for those who struggle with multitasking and maintaining emotions when trading, not to mention 24/7 availability, it’s not a foolproof way to make money in this market.
If you intend to trade, start with a demo account (which does not involve real money) and listen to experienced traders such as EllioTrades and Alessio Rastani.
You could consider leveraged trading after you solidly grasp this and feel comfortable managing risk.
5) Going into debt to invest in crypto
This is generally not a wise decision, but there are instances where it could be a sensible move.
Hear me out.
If it’s a small amount of debt relative to one’s assets or annual income, and it’s being invested in Bitcoin during the bear market, I could justify this.
However, consider the loan terms, particularly the APR involved.
Conversely, investing a large percentage of debt in altcoins is dangerous, especially when the market is overbought.
I remember meeting this guy in December 2017 when he told me he borrowed money to buy 2 BTC, when the price was around its local peak of around $19,000 per coin that cycle.
Later that day, the market started crashing. Just over a year later, BTC bottomed out at around $3,500.
I hope he held onto those two BTC, but convincing his family is tough, particularly when he has a partner and young kids.
With the high probability of getting into negative equity, borrowing a large sum to invest in a highly speculative asset (class) is not for the faint-hearted.
Even if your decision to take out debt has been profitable, don’t get cocky and assume it’s going to keep on rising without brutal pullbacks, particularly when there is unfavourable macroeconomic news or, in recent times, threats of tariffs being imposed.
Still, I doubt we’ll see major drops compared to previous cycles due to massive demand from institutional investors and fewer BTC entering circulation in the coming years and decades.
6) How are the profits used?
Investors with solid financial acumen will take their profits accordingly as part of their exit strategy and continue investing them in other asset classes.
Of course, we should also enjoy a portion of that money, particularly when it adds genuine value to our lives, e.g., essential home renovations; thoughtful travel with family and friends to help us rest and recharge moving forward; upgrading a car when required; children’s college funds, etc.
Dumb money, as I like to call it, will spend their significant crypto windfalls like it’s no tomorrow.
It’s akin to those who win the lottery jackpot.
Luxury cars, designer clothes, private jets, booze, daily clubbing, etc.
I’m not against the opulence, provided you still have plenty left over and it’s being reinvested. In some cases, the luxury is justified if you’re trying to attract a certain clientele for your business to boost profits.
But that’s unlikely to happen when dumb money is involved.
I’d rather be surrounded by authentic people than plastic personalities, but each to their own.
7) Your network
You’ll often hear that you are the average of the five people you spend most of your time with.
Who you interact with and where you primarily source your BTC, crypto and financial information will determine whether you’re a gambler or crypto investor.
One of the biggest red flags for anyone venturing into crypto is dealing with over-the-top and intense influencers.
Nobody likes desperation, especially when investing time, money, energy, and other resources into a project, business, or relationship.
Beware of how they treat others and whether they put their money where their mouth is.
Toxic influencers often tap into the emotions of people in a precarious mental or financial state by pushing memecoins plus other overly speculative crypto assets, giving people false hope that this token will be the one to do a 200 or 500x.
They’re likely promoting some obscure coin or token that is complete garbage.
It’s one thing to occasionally mention a meme coin in passing (which I have done, to be honest), but it’s another to promote it and deliberately mislead people repeatedly.
These personalities will then claim a committed, vibrant “community” behind the project and crypto, accompanied by a limited-time pre-sale before the token officially launches.
Another red flag, especially nowadays, particularly when there are hundreds of copy-cats around.
As I alluded to earlier, ask yourself if there are unique and innovative use cases behind these new tokens.
Rarely is there a genuine group of people who believe in the project and who could make it in the long run.
Rather, 99% of the time, it’s all BS. This so-called “community” is a group of early investors who are excellent marketers, repeatedly rotating capital from one token to another, profiting off people’s foolishness.
Savvy investors, on the other hand, will put their emotions aside, do their due diligence, and engage with and follow the smart money in this space.
Birds of the same feather flock together.
8) Reality vs optimism bias
This has elements of points 3 and 7, but I’ve made this a separate point to stand out.
Investors understand the risks involved (at least partially) and follow macroeconomic trends, crypto project updates, and other relevant developments to ascertain when to buy and sell.
Crypto gamblers go in with optimism bias, a.k.a. “hopium”, and believe they’ll eventually make millions from a memecoin or trending token.
They’ve been rug pulled 30 times already, but this time, it’s different.
For every success story you hear, dozens of people failed by gambling on highly speculative cryptocurrencies.
Additional thoughts
Much of this isn’t exclusive to crypto. Still, its 24/7 nature, global availability and very low barrier of entry make it easy for billions of people to participate in gambling with crypto.
You name it: sports gambling, penny stocks, casinos, prediction markets. Even these industries have knowledgeable and experienced professionals who make massive windfalls at the expense of novices.
Regarding public perceptions, I look forward to seeing revised data about American attitudes towards crypto in the coming years.
Ideally, there will be surveys in multiple countries and a study compiling this information into one, so we can see how much this varies when factoring in corresponding demographics.
If you’re struggling with a gambling addiction, consider getting professional help or using free services to begin with. There are resources available to help you overcome this. I speak from experience.
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Disclaimers
• N.B. None of this is financial advice; I am not a financial advisor. This information is for educational purposes only. You are ultimately responsible for your investments.
• My opinions in this piece might not reflect those behind any news outlet, person, organisation, or otherwise listed here.
• Please do your due diligence before investing in any cryptocurrency assets, staking, NFTs, or other products associated with this space.
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