Crypto Speculating vs. Crypto Gambling

It is important to understand that gambling and speculating are not the same thing.

“Speculation involves calculating risk and conducting research before entering a financial transaction. Gambling involves a game of chance. Generally, the odds are stacked against gamblers. When gambling, the probability of losing an investment is usually higher than the probability of winning more than the investment. In comparison to speculation, gambling has a high risk of losing the investment.” — Investopedia

Scratch-off lottery tickets. Blackjack. Bingo. All Gambling.

Financial investments, on the other hand, involve speculation. Stock purchases, options, real estate investing, and cryptocurrencies. Speculation is a category of, or quality of, an investment. And technically, any investment involves some aspect of speculation. It’s just a matter of degree.

I have seen a number of people incorrectly identifying what is happening in the cryptocurrency space as “gambling.” They conflate these two terms at their own peril. The key distinction that separates speculation from gambling is:

1. Calculating Risk
2. Conducting Research

If you aren’t calculating risk and conducting research before putting money into the cryptocurrency market (or any market...ahem), then yes, that looks a lot like gambling. And there are probably a lot of people who know almost nothing about cryptocurrencies that are making bad bets. 99% of the cryptocurrencies on the market will either not generate a return, or result in losses. The gamblers will be the biggest losers, not the speculators. Speculators will make some bad calls, but like a venture capitalist, their grand slams will more than make up for the strike outs.

I assure you, many people who have managed to make substantial returns over the past few years (months? weeks? days!) in cryptocurrency have done so because they have invested at least some time in calculating risk and conducting research. They haven’t all just gotten lucky. They are making an informed prediction about the future of finance and technology based on knowledge, and they hope to profit from it.

These people have been, and should be, rewarded. They put their money on the line. They took all the risk. They defied the naysayers. They followed their gut.

I do not recommend gambling with your money. I do recommend that you find opportunities to speculate with your money that fits your financial situation and investing temperament. And cryptocurrencies currently offers the lowest barrier of entry for anybody with even the most limited of financial resources to engage in the marketplace.

Speculate, but speculate wisely.