Crypto not suitable for retail investors

Former UK Chancellor of the Exchequer Lord Hammond says that cryptocurrency investing is “certainly not suitable for retail investors”. With crypto making such huge gains, and the fiat monetary system teetering on the brink, are the grandees from the traditional financial system really so keen to protect the retail investor?

The average retail investor just doesn’t have the sense or knowledge with which to make sound financial decisions, and therefore it is incumbent on our leaders in the financial industry to recommend that they be prevented from entering such a potentially dangerous sector.

It can certainly be argued that crypto’s playground is a place where an uneducated investor stands to lose a lot of their wealth, if not all of it, if they should make a bad decision.

For those who don’t have a few years of trading knowledge behind them, those potentially bad decisions include the likes of entering a trade with high leverage, trading on smaller time frames, and using the various trading instruments without fully understanding them.

When the crypto market gets hot, many retail investors swarm in to try and take advantage of the incredible gains to be had if one also uses the as much as 100% leverage on offer on some exchanges. 

Of course, even seasoned traders use leverage with a high degree of caution, making sure to protect their positions with tight stop losses etc. But those who are not savvy are among the 100s of thousands of crypto traders every year that are liquidated out of their positions, possibly never to enter the market again.

Many crypto exchanges are now vastly reducing the amount of leverage that investors can use, and this is a step in the right direction. However, retail investors have a right to enter the crypto market, and those who average their investments into the strong fundamental cryptos such as Bitcoin, Ethereum and some of the others, are doing extremely nicely.

It’s as rare as a blue moon that the average retail investor is able to enter into such a nascent and promising industry as crypto. To be there before Wall Street is also just about unheard of. 

In the traditional financial sector, just about all avenues for making high amounts of wealth are pretty much closed to the retail investor. All the choices on offer have middle men who charge high fees, and anything that looks remotely profitable is usually deemed to be only available for ‘accredited’ investors - i.e. a playground just for the already rich.

Lord Hammond said the following to the British newspaper The Mail in a recent conversation:

“It's almost certainly not suitable for retail investors as a mainstream investment category. I know plenty of people who have a small exposure to crypto-assets but it is money they've written off. It's gambling money. I think people should be extremely cautious. Many regard them as closer to gaming than serious investing,”

For such a highly regarded figure to try to steer retail investors away from crypto, and to actually call their investments “gambling money” seems to be rather high-handed. Did Lord Hammond ever put so much effort into warning retail about the stock market and other traditional investments?

Yes, there are dangers and pitfalls in any type of investing, whether that be crypto or any other asset, but please do not assume that retail investors are all like children, to be told what they can and can’t do by extremely wealthy parents.

Whether Lord Hammond admits or knows it, we are all on the edge of one of the most earth-shattering upheavals in financial history. What the retail investor does now is going to be absolutely crucial for their financial survival. All should have the right to this opportunity - the average retail investor just as much as Wall Street.

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.