Risk and return, can you get the first, without going through the second? by Karupanocitizen

Many times I hear people talk about how volatile and risky the crypto business is, "don't mess with cryptocurrencies, you can lose everything," I hear daily. Indeed that is a possibility, losing everything in a bad investment, an uptrend, all the money bet and suddenly a strong correction and the money disappeared, goodbye to the dream of getting rich!

Now I wonder, does this kind of thing not also happen in the world of Fiat? What happened to those who invested in shares of companies like Kodak, Atari, Blockbuster, Nokia, or Olivetti? Real giants, that no longer are worth nothing, didn't they end up losing everything too?

Risk and return, economic theory

In financial matters, there is an economic premise that associates risk with performance, where higher risk is expected to produce a high return, while lower risk results in lower performance. This is logical and works in a very similar way to the theory of supply and demand, there are very few people interested in investing in a project who do not know if it will work, while many are willing to put their money where they already know they will get. Benefits.

In the financial world, "security" tends to be synonymous with "stability", the more stable an investment is, the safer it is and the less return it offers, such as time deposits in a bank. In these types of markets, profits are measured by quantity, the more money you invest, the more you earn, they are safe, yes, but they require strong investments to be profitable.

The opportunities of the crypto market

On the other hand, we have the cryptocurrency market. In this type of market, “volatility” or “risk” is perceived as an opportunity, in the same way, that it happens for example on Wall Street. A risky and successful stockbroker makes a big profit by investing in start-ups, not established companies, in the same way, a good trader will look for low-value currencies with a very pronounced uptrend to take advantage of it. You see, it is not a matter of the market but the risk-return relationship.

The difference between the crypto market and the stock market is that the volatility of crypto is currently so high that a few hundred dollars can produce thousands, and even in some cases, millions of dollars with a good strategy and, of course, taking big risks. It is logical, it is a market with only twelve years, every project that is born is a great unknown, most investors do not even fully know how it works, what is the added value that it contributes to the world economy.

The crypto market resembles me, for investors, as a representation of the North American west for the settlers in the times of the gold rush, a world full of risks and setbacks, but with the opportunity to be able to get rich overnight. The morning, the reason? No one was mining the gold until they arrived.

Nothing ventured nothing gained?

Returning to the central theme of my publication and analyzing the theory of risk and return, it is impossible to think that with little money you can amass an immense fortune without taking great risks, it will always depend on us how we want to grow, if we want to do it quickly we will have to necessarily take risks, trust a project and invest, there is no other way. A good study of each project could indicate the real possibilities of it to be successful, this could help us reduce that risk.

Another of the alternatives we have to minimize risk when investing is diversification. Creating a portfolio of crypto assets that mixes highly volatile tokens, with others that maintain a marked tendency to maintain their value, would also allow us to take advantage of the best of both situations, having the possibility of seeking high returns without risking everything, but conserving a certain amount. of resources as a kind of reserve funds.

As we can see, in the end, everything will depend on how fast we want to make our fortune, we can go slowly but surely or we can print it as fast as our funds allow, with which strategy do you feel more comfortable? For risky investments or safe investments? Does the cryptocurrency market seem too risky? I hope to read your opinion in the comments, greetings.

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