Here's Why Not to Compare Crypto Trading to Gambling
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Here’s Why Not to Compare Crypto Trading to Gambling

Here's Why Not to Compare Crypto Trading to Gambling

Maybe it’s the high risks and high gains or just the high thrills. But perhaps it’s high time for cryptocurrency trading to shake off its perception associated with gambling.

The value of the global online gambling industry in 2020 reached more than $57 billion. That number is set to grow at a compounded rate of 11.31% by 2025 to surpass $97 billion.

Sponsorship support and easier access to online-based betting platforms are the major contributors driving the gambling industry to the top. While it is a lucrative market with vast opportunities, betting investments present several downsides. These shortcomings set them apart from cryptocurrency. 

Similar at Face Value, Distinct in Approach

Gambling and crypto investing differ in major ways, primarily the strategies used in gaining profits. Today the digital assets market counts over 8,000 cryptocurrencies and has an overall market cap of around $2.5 trillion. Cryptocurrencies and blockchain technology began to emerge as early as 2009 with features expected to disrupt the traditional financial system. 

However, as much as both cryptocurrencies and gambling are ways to earn profits for many, making investments in each of them is in no way similar.

Digital assets are highly volatile, rendering them an appealing instrument for investment. For the same reason, investing in digital assets is accepted to be a risky endeavor with limited control. 

Even so, different users prefer dissimilar crypto investment tactics to try to manage that risk. They all rely on constant evaluation of risk tolerance, investment amounts, and investment horizon, among other factors.

Crypto Investing and Gambling: What’s the Difference?

Cryptocurrencies are digital assets that reside on distributed ledgers and eliminate the need for control by a central authority. On the other hand, gambling is betting a valuable asset with the hope of gaining more from an event’s outcome. So how do the two differ in investing terms?

  • Risk Mitigation

Gambling evades the idea of risk mitigation to some extent, leading to loss of valuable items. In some extreme cases, users may develop a gambling addiction since the thrill of winning blinds them from the risks involved. A study shows that five of 100 gamblers have a gambling addiction, leading to bankruptcy or broken relationships.

Investing in cryptocurrencies requires various risk mitigation strategies to minimize any financial losses. Implementing the right trading strategy can go a long way towards achieving a successful trade. 

Crypto bots are good examples of risk management strategies that investors employ. Trading bots operate independently and can detect profitable trades even in the absence of investors.

  • Real-World Solutions

Short-term gambling generates a vast amount of earnings that can just as easily wither in minutes. Thus, the betting sector largely employs chance as its only solution, making it an unprofitable way of generating income in the long term. 

Digital currencies, on the other hand, offer users with real-world financial solutions that seek to offset the traditional system. For instance, Ethereum’s blockchain network empowers developers to build decentralized applications and smart contracts. Aside from being the second-largest cryptocurrency, Ethereum is home to prominent DeFi protocols such as Maker, Aave, Compound, and many more. 

  • Skill Gaining

Individuals barely accumulate valuable skills that can boost their earnings in the gambling sector, solely depending on outcomes. When the result comes in favor of the participant, it becomes a win. Consequently, it’s also a loss when the product is different from the expected result. 

Crypto investments allow users to gradually grasp everything to do with digital asset trading, attain analytical and technical skills and risk management ideas. Besides achieving trading skills, users also gain the ability to write and earn from publishing crypto-related material. 

  • Diversification

Portfolio diversification in the context of cryptocurrencies refers to investing in different types of digital assets. It assists investors in safeguarding against certain market turmoils since most of these virtual currencies rely heavily on market behavior.

Therefore, when one asset experiences a decrease in value, the other will have an increasing price. Gambling does not employ the same concept since bettors may lose money or valuable assets when creating multiple earning streams.

Strategies Applied

Clearly, various reasons show the difference between crypto investing and gambling. Considering all that, crypto users can adopt crypto trading strategies to secure lucrative profits.

The investment strategy uses a reading from 0-100, which interprets whether an asset is oversold or overbought. Generally, a virtual currency is considered overbought when it moves past 70 and oversells once it plunges below 30. Through RSI, users can weigh whether to buy/sell the asset after it settles on a particular reading. 

Following all that, some strategies applied in crypto trading that differ from gambling include:

Hodling – It remains one of the safest investment strategies in the crypto sphere to date. It involves buying a digital currency and holding the asset for more extended periods. Here, a trader deliberately avoids selling the crypto asset while leveraging its price momentum in the market. Investors only sell the virtual currency once its value surpasses the initial buying price.

Position Trading – In a position trading strategy, users maintain a specific position to reap profits based on the market trends. Unlike day trading, where investors are constantly performing trades, position trading preserves the same point for days or, in some scenarios, can extend to months. Position trading gives traders ample time to conduct analyses and evaluate the most viable trading plan to execute.

Relative Strength Index (RSI) – RSI represents a momentum oscillator tool traders use to examine an asset’s price change. The technique is a brilliant concept from John Welles, who needed to visualize market momentums. 

Final Word

Gambling presents a higher chance of experiencing financial losses despite being a billion-dollar industry. Therefore, the betting sector is ultimately a short-term venture that can accumulate profits or losses without considering any risk management strategy. 

However, crypto investments attempt to mitigate their volatile forces using effective trading strategies such as position trading, hodling, etc. What’s more, digital asset trading allows users to diversify portfolios and multiply their earnings. As such, compared to gambling, cryptocurrencies provide promising results that do not entirely rely on predictions.

 

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