On this special crypto episode of A Wiser Retirement™ Podcast, Casey Smith and Robert Swarthout discuss some of the reasons why Crypto is so confusing to the average investor and why people may opt for other investment options.

SUMMARY:

Lack of Knowledge Leads to False News

In this modern day and age, we all rely on media channels to feed us news and current information. Unfortunately, the news that often makes the headlines is negative and/or inaccurate. People try to explain new information, but a lot of times fail to first understand it themselves. Thinking back on the first years of the internet, the late 90s, the internet was this obscure, niche technology that not everyone needed access to. When the media would bring up the subject, they couldn’t quite explain it. The same is happening with Crypto. Media channels don’t quite understand Crypto, but they know it’s out there and that it’s becoming increasingly popular, so they have to talk about it. Therefore, they often talk about it in a way that is difficult for average investors to understand.

Crypto as a Part of Your Daily Life

A few other reasons why individual investors struggle with Crypto are, they can’t touch it, it currently doesn’t pay income, and they don’t use it every day. We all can adapt to new things as long as it starts becoming part of our daily lives. Most Americans don’t understand the purpose of crypto, especially because until now, it hasn’t affected their daily lives. However, crypto is slowly changing the plumbing of the financial system. Once that is well established, then we might start seeing real changes in our daily lives.

Lack of Regulations Cause Skepticism

Another reason why investors are skeptical about crypto is the lack of regulations. Once regulations are implemented, we will have a more clear path forward. Having more regulations combined with a neutral narrative from the news streams in regard to crypto would probably double its market capital within a short timeframe. Unfortunately, the United States has a very large crypto market capital and is very negative about the subject. Therefore, we end up having more influence on the matter than one would think. As with many other matters in the U.S., crypto has become a political matter. There has been talk that the U.S. will probably not get any clear regulations until there’s a new administration in place.

Just recently (mid-April 2023), Coinbase sued the SEC for not responding to their request for rule-making from last Summer. When you ask an agency for rulemaking they have a timeframe to respond, and the SEC is outside of this timeframe. Previously, Coinbase had a different attitude toward the SEC, they were willing to cooperate with whatever was necessary. However, since realizing that the SEC doesn’t have the same attitude toward crypto, they are now willing to “throw the first punch.” Since regulators are acting so much outside of what is reasonable, having a somewhat offensive tactic makes sense when it comes to cryptocurrencies. One thing is certain, we need regulations to understand what kind of metrics need to be put in place.

Why Crypto is So Confusing to the Average Investor

We can talk all day about how so many of the regulations we do have in place now are unfair and seem to be there to put extra weight and pressure on the crypto market, discouraging investors to chose this channel. Additionally, the lack of knowledge from media streams on the subject demotivates Americans to invest in crypto. However, we know that crypto has not only survived through all the initial difficulties, but it is growing and reaching new levels.

TIMESTAMPS:
01:05 Lack of Knowledge Leads to False News
09:05 We Can All Get Used to New Things as Long as They Become Part of Our Daily Lives
11:45 Lack of Regulations Cause Skepticism

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Cryptocurrency has been a buzzword for a few years now, with many people intrigued by its potential to make it big in the world of investments. However, despite the hype, cryptocurrency still remains a confusing and intimidating subject for the average investor. Here are some reasons why:

1. Lack of understanding of how it works: Many people don’t understand how cryptocurrencies work, and therefore find it difficult to invest in something they don’t fully comprehend. Unlike traditional investments like stocks and bonds, cryptocurrencies are decentralized and operate on a blockchain network. This means that transactions are verified by a network of computers rather than a third-party like a bank or government. This can be difficult for people to grasp, as it is not something that they are familiar with.

2. Volatility: Cryptocurrencies are notoriously volatile, meaning their prices can fluctuate rapidly and unpredictably. This can be overwhelming for investors who are used to the stability of traditional investments. It’s not uncommon for the price of a cryptocurrency to double or even triple overnight, and then plummet just as quickly. This unpredictability can make it difficult for investors to feel confident in their investments.

3. Security concerns: Cryptocurrencies are highly secure, but scams and hacks are still a concern. The lack of regulation in the cryptocurrency market means that investors need to take extra precautions and conduct thorough research before making an investment. This can also be intimidating for an average investor who is not well-versed in the technology and security measures behind cryptocurrencies.

4. Lack of mainstream integration: Cryptocurrencies are still seen as a niche investment by many, despite their growing popularity. They haven’t yet been fully integrated into mainstream financial institutions, which can make it difficult for investors to know how to invest in them. Additionally, many people are hesitant to invest in something that hasn’t been widely adopted or accepted by the general public.

5. Jargon: The cryptocurrency industry is rife with jargon that can be confusing for the average investor. Terms like “mining”, “blockchain”, and “wallets” are thrown about casually, and their meanings are not immediately intuitive. For investors who are just starting out, this can be especially confusing.

While the potential to make a profit from cryptocurrency investments is certainly there, the confusion and intimidation associated with investing in something so complex and volatile can be a deterrent for the average person. As the industry grows and becomes more mainstream, it’s possible that these barriers to entry will become less daunting. In the meantime, it’s important for investors to conduct thorough research, consult with financial professionals, and proceed with caution.