The UK Daily Mail published a story today telling of a wife’s fury on finding that her husband had ‘lost’ $57,000 to crypto investments. The wife asked a financial expert for advice, who recommended that their money would be better in a savings account.
The mainstream media is full of stories of normal people who either lost a lot of money by investing in crypto, or who were scammed or conned out of their money. Is it that crypto is such a novelty still in the mainstream, as to why it gets inordinate coverage of these types of stories?
Referring to the story that was covered, it appears that the gentleman in question is down around $57,000, half of his original investment. It certainly wouldn’t be argued that many other investors are likely down as well. The crypto market has corrected quite strongly, and most cryptocurrencies have reversed to the tune of 50% at least.
Most retail investors (and very possibly experts from the traditional financial industry) do not understand the high level of volatility in crypto markets. A combined market cap of less than $2 trillion means that prices can swing up and down quite violently.
If you believe in the incredible innovations that crypto brings to finance and other areas, then small investment amounts made over time into the most fundamentally strong cryptos have shown to pay off over the longer term.
Yes, there are traders who can make a lot of money by predicting these large swings in price, but they are experts in the crypto market, and this kind of trading is probably not recommended at all to the inexperienced retail investor.
The advice to the husband and wife who are so heavily invested into crypto is to not put in more than they can afford to lose. Obviously, it is a bit late for that now, but as mentioned above, investments are better when they are smaller allocations over a longer period of time, with a longer term time horizon.
As for the financial expert, I agree with his advice of not putting their money into shares or beanie babies. However, telling the couple to put their currency into a savings account, which currently offers 2.12% for the best 5-year fixed rate, is tantamount to them losing around 13% in the purchasing power of the sum they put in per year.
The Shadow stats site gives a very clear estimate of how inflation is presently running at 15% a year based on the original consumer price index figures from the 80s.
Financial advisors play a critical role in the lives and livelihoods of the people they advise. Not doing their homework on new ways of saving and investing is doing their clients a huge disservice.
They certainly won’t be the first in failing to understand cryptocurrency, and an anti-crypto media will not help, but crypto and blockchain will be the way that all finance will go over the next few years, so it is especially incumbent on so called experts to put the time in so they can better advise their customers.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.