MetaMask Co-Founder Says Crypto Investing Is ''Gambling''

There's a big difference between gambling and investing, though both involve risks.

It's not unusual to hear critics label crypto investing as gambling or call it a Ponzi scheme. But it's rare to hear industry insiders use those words, as MetaMask co-founders did in a recent Vice interview. MetaMask is one of the most popular crypto wallet options and has attracted millions of users. MetaMask founders Aaron Davis and Dan Finlay spoke about how the industry has evolved and what might happen next.

MetaMask founders are concerned about the direction crypto has taken

The cryptocurrency market has struggled this year. Some top cryptos fell 90% or more from their all-time highs, several platforms have collapsed, and more may follow. As a result, many crypto investors face significant losses or are underwater on their investments.

One of the issues the two founders touched on in their wide-ranging interview was the way people have been encouraged to put their life savings into crypto -- a choice Davis called "extremely dangerous." He said, "It feels too little too late, but putting your money in cryptocurrencies is gambling."

The pair also discussed security, NFTs, and the recent crypto crash. Both raised concerns about the number of bad actors and fraudulent projects in the market. "We can't stop people from making Ponzis on blockchains," said Finlay. "It’s by definition impossible for us to wrap the whole thing into one unified bow and enforce it in a direction."

MetaMask is looking at ways to tackle some of these issues, including making it more difficult for dodgy players to get exposure. But they also pointed out that investors bear some responsibility too. Projects that seem too good to be true often are -- and given that there is very little investor protection in crypto, we all need to be careful.

Nevertheless, the pair are optimistic about the future of crypto. But it's more about ideology than money. For example, Finlay would like to see it solve global problems such as climate change or social inequality.

Is crypto investing akin to gambling?

There can be some similarities between gambling and investing, whether in crypto or equities. Both involve risk, and you can lose money in both activities. But investing is about building a solid portfolio that you believe will create long term wealth. Gambling is about luck and playing the odds.

Crypto investments are risky, but that doesn't necessarily make them gambling. It depends on how you invest. For example, there's a lot of speculation in the crypto market. It's also easy to buy and sell crypto on various exchanges, which can lead to rapid trading rather than thought-out decisions. Day trading and highly speculative investments can quickly take you into gambling territory.

In contrast, long-term investors research each project carefully and plan to hold their assets for five to 10 years. They invest because they think there's long-term value. There's still risk involved, as there's a lot we don't know about how the crypto market will evolve -- it could collapse completely. But it's the kind of calculated risk that is often part of a wider investment strategy.

This is why it's advisable to only invest money you can afford to lose in crypto -- that way, you benefit if it succeeds, but don't face financial ruin if it fails. If you understand the risks, take time to buy coins or tokens that you believe will outperform, and plan to hold for a decent period of time, you're making a thought-out investment. That's very different from what you'd do in a casino.

Bottom line

Cryptocurrency investing can be risky. There are a number of bad actors in the market, with relatively few restrictions on how they can behave. In last year's crypto frenzy, prices seemed to only go upwards and platforms seemed able to pay astonishingly high rewards. This climate encouraged gambling rather than investing -- people felt they could do no wrong.

Unfortunately, this year has shown that crypto investments can lose money and platforms can fail. As a result, many people have lost money. But if you keep your eyes on the long term, manage the risks you take on, and avoid platforms that promise too much, you can avoid crypto gambling.