Cryptocurrency has become a popular investment in recent years, as many people want to own a stake in digital coins. However, not everyone believes investing in crypto is a smart choice. In fact, finance guru Dave Ramsey is very skeptical about the prospect of this asset class. Not only that, but Ramsey has also made clear that he believes certain crypto investors are actually “dumb.”
While these are harsh words, Ramsey had an explanation for why he’s questioning the intelligence of some people who invest in crypto. Here’s why Ramsey believes some of these investors may not be making the right money management decisions to set them up for success.
Here’s what Ramsey had to say about crypto investors
Ramsey has made his position on cryptocurrencies very clear for a long time.
While the radio personality and financial guru thinks that crypto will eventually become more sophisticated and more stable, he doesn’t think that this asset class has reached that point yet.
Right now, Ramsey believes that it is simply too risky, and he’s actually gone so far as to compare the crypto craze to past products like Pokémon cards, Beanie Babies in the 1990s, and toilet paper during COVID-19, all of which saw price spikes due to hype and perceived scarcity before collapsing.
Ramsey’s concern is that the assets are too volatile, with no clear way to predict where the value is trending, stating at one point: “It’s like riding the worst roller coaster that went off the rails at Six Flags,” and advising people to look at past performance to see what he means. “Chart the volatility of Bitcoin, and then smile at me with a serious face and tell me this is a solid investment, and I’ll tell you you’re smoking crack,” he said.
For these reasons, he doesn’t believe it is possible to actually “invest” the way you would in a stock or other asset that had predictable performance and metrics for success that you could research. He thinks crypto investing in nothing more than gambling or speculation at best.
And, in April, when he appeared on the Shawn Ryan Show podcast, he said that”If you chart Bitcoin and you don’t see risk, you’re dumb.”
Is Ramsey right that crypto is too risky for certain investors?
Ramsey does have a point in that cryptocurrencies are more volatile than many other assets you can invest in, and he is also correct that if you believe there is no risk to investing in digital currencies, you could be making a major mistake that puts your financial security at risk.
The reality, however, is that most cryptocurrency investors probably don’t go into their investments assuming that buying Bitcoin or other digital currencies is a risk-free investment. Instead, most investors likely see the risk, but also realize that there are substantial potential rewards.
Of course, it’s true that Bitcoin is volatile, and there have been times when the price has collapsed. But, there have also been times when the price has soared.
There are plenty of arguments in favor of investing in crypto, and especially in established coins like Bitcoin. The key to investing the smart way, however, is not to invest money that you absolutely cannot afford to lose. Yes, it might be “dumb” to put your entire retirement nest egg in crypto because there is a greater chance of losing money than if you bought the S&P 500. But it is definitely not dumb to be willing to take a calculated risk and put some money, which you could afford to lose, in a well-researched cryptocurrency investment that has the potential to pay off.
So, you should listen to Ramsey in the sense that you take the time to consider the risk of investing in digital coins. But, you may come to a different conclusion about whether taking on that risk is worth it or not and there’s nothing wrong with that.
You could also work with an experienced financial advisor who can offer you insight into how cryptocurrencies can become part of a broader portfolio that gives you the best chance of building wealth while taking on an appropriate level of risk for your specific situation.
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