In a recent interview with Arabian Business, the CEO of a Swiss private banking group likened cryptocurrency investing to gambling. But was he being willfully disingenuous or just lacking in understanding? Here is what he got right and wrong.
Naysayer says “Nay!”
Hmmm… traditional banking guy spreads FUD, eh? We haven’t heard that one before. So who said what this time?
From the report as published, it seems he didn’t actually say much. The ‘he’ in question being the head of Zurich-based Julius Baer Group, Bernhard Hodler. Yes, that is HODLer, as in one who HODLs, as in the least gamble-y form of crypto (or any other type of) investing.
Anyway, first he makes the definition between blockchain and cryptocurrency. Blockchain equals good, Cryptocurrency not so much.
Same but Different
He thinks there is a lot of speculation, a lot of volatility. And although he believes that some currencies will make it, nobody knows which, so his company advises against crypto investing altogether.
They will give “access to structured products” on request, but warn clients that it is “a bit [like] gambling.”
Well, that seems massively different to investing in the stock market. Because that has no speculation, no volatility, and everyone knows from the start which companies will succeed, right? (◔_◔)
Investing vs. Gambling
Dictionary definition time:
- Invest – put [money] into a financial scheme, shares, property, etc. with the hope of achieving an eventual profit
- Gamble – 1. play games of chance for money, 2. take risky action in the hope of a desired result
So any investment without guaranteed returns could be considered gambling by the second definition. And investing in cryptocurrencies falls outside the definition of gambling by the first definition.
The very act of investing is putting the money into something with the expectation of future returns. You gamble on a one-off event based on pure luck. There is no ownership of anything, and no expectation of return, just hope. More in-depth discussions of this topic are available on Investopedia and this financial blog.
So, HODLer, Just HODL
We generally advise that cryptocurrency is not a short-term investment, is certainly not a get rich quick scheme. Despite all the stories of those who have made millions, there are plenty of those who have lost out… ummm, just like the stock market.
I would suggest to Mr. Hodler that next time he wants to compare crypto-investing to gambling, he should take greater care to delineate the respect in which cryptocurrency is different from other investment vehicles in this respect.
Right, now I’m off to check my binary options positions… What? I didn’t say that you can’t gamble on crypto-currency, just that investing is not the same thing… and anyway, all of my options are on gold and blue-chip stocks.
Do you agree with Mr. HODLer? Is cryptocurrency more like gambling or investing? Let us know in the comments below.
Images courtesy of Arabian Business, Shutterstock