Article hero image

The Five Worst Reasons to Be Trading Crypto

Wealthsimple makes powerful financial tools to help you grow and manage your money. Learn more

Maybe you’ve heard that Wealthsimple offers more coins and tokens than ever — including Uniswap, Aave, and Dogecoin. And you might think that means you should drop what you're doing and start buying and selling these immediately. If you think that’s our opinion though, you don’t know us very well. Our opinion is more like: everyone who is thinking about buying crypto should drop everything and... learn about when and how and why they should buy crypto, and the risks involved, and how it can fit into a sound financial plan geared for the long term. Because even if you don’t mind speculation (and crypto is, indeed speculative; more on that soon), there are smart ways to do it.

All we’re saying here is that there are good reasons you should be using Wealthsimple Crypto and bad reasons. And to help you tell the difference, here are five terrible reasons to trade crypto.

1. Because you think the risk is the same for crypto as it is for buying AT&T stock

Nope. Not true. Because cryptocurrencies are speculative. It’s a good word to know.

Get the best stories from our magazine every month

Sign up for our email newsletter

“Cryptocurrencies — relative to stocks, ETFs, and commodities like gold — are a very new thing,” says Danish Ajmeri, the Head of Wealthsimple Crypto. “They have only been around for about a decade. It’s still unclear what the long-term prospects of this space will be.” Because of the relative newness of cryptocurrencies, they don’t yet possess a history of returns, which is a valuable metric for measuring an asset’s long-term stability. “With stocks, for example, there’s a lot of underlying financial data and economics that underpin what the valuation of a company is,” he says. With cryptocurrencies, on the other hand, there’s a higher risk that “the value could go down to zero, or go up exponentially, or end up somewhere in the middle.”

This is why many investors refer to cryptocurrencies as speculative investments. They’re new, and they’re more vulnerable to investor psychology. “The question of whether [a specific type of cryptocurrency] will even be around in a few years, and if it is, what is it actually going to be worth, makes it hard for investors — and especially people who aren’t well-informed — from making smart, educated decisions about how much of their wealth they should be putting in something like this and what kind of expectations they should have for the returns.”

2. Because I’m smart enough to keep all my crypto safe right here on my computer

Bitcoin and other cryptocurrencies are unfortunately a favoured target for scammers. Remember when Jeff Bezos, Elon Musk, and Barack Obama suddenly tweeted that they were matching any bitcoin donations sent to an attached link, and victims lost ? Crypto isn’t like a credit card, where you have some protection from bad actors. Once cryptocurrencies leave their designated “wallets,” — aka an online app that holds your currency — there’s no way to reverse the transaction. Trading platforms are vulnerable to hacking.

It’s worth noting that Wealthsimple Crypto is closed loop. Which means you can’t buy or sell anything with the crypto you hold with Wealthsimple — it’s held in “cold storage” by a third party — so there are no transactions you’d later wish you could take back. “We built a closed loop system where we ‘custody’ all the crypto assets on your behalf,” Ajmeri says. “That means it’s not even possible to interact with other wallets and parties.

Recommended for you

  • Two Genius Moves to Make With Your Tax Refund

    Finance for Humans

  • Is it Better to Pay Down Your Mortgage or Invest?

    Finance for Humans

  • How Safe is a Bank Account?

    Finance for Humans

  • How to Make Your Money Make Money

    Finance for Humans

3. Because you really need the money you’re investing in crypto and you’re counting on it to grow

If you have $10,000 earmarked for your kids’ college and you’re going to need it, that money probably has no business being parked in a crypto account. Likewise: if you don’t have an emergency fund, investing in crypto is probably not the thing to do with money you’re saving — if you haven’t socked away three to six months of expenses, you probably aren’t ready to invest at all, actually, whether that be in cryptocurrencies or in the low-cost ETFs in our Wealthsimple Invest portfolios.

On the other hand, if you have savings that you’re OK losing (or losing some of), a speculative investment is totally fine. Even, for some folks, fun.

4. Because you’re pretty much for sure gonna get rich off this, and quickly

If you’re pouring your hard-earned money into crypto because you think you’ll be one of those “success stories” where some lucky investor became a millionaire after investing $10 in crypto a couple of years back, then you may as well just try your luck in Las Vegas. For all those success stories, there are stories of people who bought at the peak and suffered big losses. During 2017, Bitcoin’s price surged more than 1,000% (in December of that year, one bitcoin was worth $20,000) and stories of average individuals who became millionaires were breathlessly reported everywhere. Then, within 11 months, it fell 80% from its high.


The simplest way to invest in crypto

Buy and sell Bitcoin, Ethereum, Aave, Uniswap, and more — instantly.

inline cta

A much better reason for buying crypto is that you understand what it is, and believe in its potential. “A lot of people are investing in bitcoin because they see it as a kind of digital gold — an inflation hedge,” Ajmeri says. “Especially during the last couple of months, where we've seen trillions of dollars in stimulus being created, and some people are losing confidence in government backed-currencies. We don't either agree or disagree with that. It's up to investors. But believing in the value of something is a better reason to invest in it than, say, hype.”

5. Because you think crypto is a replacement for a highly diversified long-term investing portfolio

There’s a reason why diversification is such a popular investment strategy: when you diversify you manage your risk by making sure not all your eggs are in one basket. Especially not a super volatile basket like crypto.

If you’re diversified, it won’t be so devastating if, say, your crypto investment ends up being more of a bust than a boom. Those losses could well be covered, and then some, with your investments in stocks or bonds or real estate or what have you. If, however, 60% of your portfolio is invested in cryptocurrency, then a bust won’t just sting — it could spell real trouble.

Look, we obviously think there are totally legit reasons to trade cryptocurrency. And that if a person is going to do it, she should be using a regulated, secure, low-cost platform designed by an experienced (and beloved! Can we say that? Let’s say that) financial company. And if you’re doing it safely, and for all the right reasons? Happy crypto-ing.

Luisa Rollenhagen is a writer and editor who lives in Berlin.

Money Diaries


Margaret Atwood


Get the best stories from our magazine every month

Sign up for our email newsletter

  • Finance for Humans

    Ask Lizzie: How Do I Know If I’m “Paying My Dues” or “Getting Taken Advantage of”?

    Our columnist looks at the incredibly slow changes happening in corporate culture — and how (and when) to stand up for yourself.

  • Finance for Humans

    Our Four Step Plan to Investing in a Crappy Market

    And oh, it’s been crappy. It's easy to feel like an investing genius when the markets are going up. But how do you stay smart when markets are... not up?


    The simplest way to invest in crypto

    Buy and sell Bitcoin, Ethereum, Aave, Uniswap, and more — instantly.

    see-more cta
  • Finance for Humans

    Nine Ways to Be Smart When the Market Goes Down

    Smart investors don’t try to avoid downturns, which are inevitable. Instead, they make sure they’re in a good place when the markets go back up. Because that’s inevitable, too.

  • Finance for Humans

    Why Most Eco-Friendly Investment Funds Really Aren’t That Eco-Friendly

    There are a whole bunch of investment portfolios that claim to be socially responsible and environmentally benevolent. The trouble is that it’s super tough to pick a fund that delivers on its promises.


The simplest way to invest in crypto

Buy and sell Bitcoin, Ethereum, Aave, Uniswap, and more — instantly.

full cta

Our best stories, once a month.

Sign up for our newsletter

The content on this site is produced by Wealthsimple Technologies Inc. and is for informational purposes only. The content is not intended to be investment advice or any other kind of professional advice. Before taking any action based on this content you should consult a professional. We do not endorse any third parties referenced on this site. When you invest, your money is at risk and it is possible that you may lose some or all of your investment. Past performance is not a guarantee of future results. Historical returns, hypothetical returns, expected returns and images included in this content are for illustrative purposes only. By using this website, you accept our (Terms of Use) and (Privacy Policy). Copyright 2023 Wealthsimple Technologies Inc.