The rise of cryptocurrencies, such as Bitcoin, Ethereum, and Dogecoin, has sparked a great deal of interest and debate in recent years. Some Christians are excited about the opportunities that cryptocurrencies offer for investment and financial gain, while others are more cautious, voicing concerns about the volatility and ethical implications of these digital assets. In this article, we will explore some of the key issues and considerations for Christians when it comes to investing in cryptocurrency.
It is interesting to note that the meaning of Crypto comes from the ancient Greek κρυπτός (kruptós) which means “hidden, secret.”
Before investing in cryptocurrency, therefore, it is important that the Christian gets to understand this form of money and approach this, as with any investment opportunity, with wisdom and discernment. The Bible teaches us to be good stewards of the resources God has given us, and this includes our finances. "The plans of the diligent lead to profit as surely as haste leads to poverty." (Proverbs 21:5)
This means that we should take the time to educate ourselves about what crypto is, what its risks and potential rewards are, and seek the guidance of wise and trusted advisors.
The diligent Christian with surplus money to invest will seek God’s wisdom as He reveals it to us. “For nothing is hidden that will not be made manifest, nor is anything secret that will not be known and come to light.” (Luke 8:17)
What is cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Transactions are recorded on a decentralised public ledger, called a blockchain, and each currency has its own underlying technology, such as the blockchain of Bitcoin, Ethereum, etc. Cryptocurrency operates independently of a central bank, and transfers are made directly between users through the use of public and private keys.
Investing in crypto
It's important to note that investing in crypto is highly speculative and comes with a high degree of risk. It's not suitable for all investors, particularly for those who are risk-averse or are looking for a more stable investment. All investments carry some level of risk, and there are ways to mitigate risks of investing in cryptocurrency. It is important to diversify your portfolio, investing in a range of different assets including stocks, bonds, and real estate, in addition to cryptocurrency. This can help to reduce the impact of any losses in one area on your overall financial situation.
One financial advisor gave this excellent advice. “There are three main considerations.
One, your ability. Do you have the ability to learn and understand it? Two, your liquidity. Do you have money in the bank so you won’t fall into debt? Three, your suitability. This is a very high-risk profile.
Cryptocurrency also has the VUCA element – volatility, uncertainty, complexity and ambiguity. So, you need to take a lot more time to learn about it instead of jumping into it.”
Risks
Investing in cryptocurrency comes with a number of risks that investors should be aware of. Here are my top 7 risks associated with investing in crypto:
1. Volatility: Cryptocurrency prices are highly volatile and can fluctuate dramatically in a short period of time. This can make it difficult to predict the value of your investment and can result in significant losses if you're not careful.
2. Lack of regulation: Cryptocurrency is not regulated, which can make it difficult to protect your investment. Additionally, regulatory changes can occur that could negatively impact the value of your investment.
3. Hacking and fraud: Cryptocurrency exchanges and wallets are vulnerable to hacking and fraud. If you store your crypto on an exchange or in a digital wallet, it's important to make sure that the platform is secure and that you have strong passwords and two-factor authentication.
4. Lack of understanding: Cryptocurrency can be difficult to understand, especially for those who are new to the market. It's important to do your own research and to consult with a financial advisor or other expert before investing.
5. Scams: Scammers may use the hype around crypto to trick investors into sending money to fake projects or exchanges. It's important to be vigilant and to only invest in projects that have a strong track record and a solid team.
6. Lack of insurance: Unlike traditional investments, cryptocurrency is not typically insured. This means that if an exchange or wallet is hacked, or if you lose your private key, there is often no way to recover your investment.
7. Illiquidity: Some crypto assets can be illiquid, meaning it can be hard to find buyers or sellers for the assets you wish to trade, making it difficult to cash out your investment.
Biblical perspective
The Christian view on Bitcoin and other cryptocurrencies can vary and is often influenced by individual interpretation of scripture and theology. Some Christians may view it as a positive development in the financial world, as it operates outside of traditional, government—regulated, banking systems and has the potential to empower people in countries with weaker currencies or limited access to traditional banking. Others may be more sceptical and view it as promoting materialism and greed or view it as incompatible with Christian values around stewardship and the responsible use of money. There is no single "Christian view" on crypto, and individuals and communities may hold differing opinions on its use and morality.
Investing in crypto currencies is not illegal and a Christian should be free to hold crypto currencies. However, there are some compelling reasons why it is prudent for the Christian to remain extremely careful about this type of investment, for example;
1. Environmental cost
Mining crypto consumes a huge amount of energy. It has been calculated that the amount of electricity needed to maintain bitcoin is more than the annual consumption of The Netherlands.1
2. Potential for illegal activities
There is clear evidence that crypto is being widely used to finance drug deals, weapon trading and other criminal activities. It was estimated that in 2019, over 46% of all Bitcoin transactions was involved with illegal activities.2
3. The temptation for speculation
As Christians we want to invest rationally and responsibly. We cannot give explanations for its radical swings in price. The temptation to take extraordinary risks in order to make money is high. “A faithful man will abound with blessings, but whoever hastens to be rich will not go unpunished.” (Proverbs 28:20.) We want to invest in building wealth, not merely accumulate riches.
4. The risk is extremely high
Although a certain amount of risk-taking is inherent in investing, as Christians, we want to take a calculated risk, based on known factors. This is not the case with crypto’s. “Here is another serious problem I have seen under the sun. Hoarding riches harms the saver. Money is put into risky investments that turn sour, and everything is lost. In the end, there is nothing left to pass on to one’s children.” (Ecclesiastes 5:14,15)
Conclusion
As Christians, we are called to act ethically and with integrity in all areas of our lives, including our financial dealings. This means that we should carefully consider the ethical implications of investing in cryptocurrency and ensure that our investments are aligned with our values and beliefs.
Ultimately, the decision to invest in cryptocurrency is a personal one, and there is no one-size-fits-all answer. As with any investment opportunity, it's important to approach cryptocurrency with wisdom, discernment, and a strong ethical compass. By doing so, Christians can ensure that their investments are aligned with their values and beliefs, and that they are using their resources to further God's kingdom on earth.
A footnote: Due to the high risk, it would be wise to only invest what you can afford to lose. If you could afford to lose some money – why not invest this in God’s Kingdom work? It has been said that the bellies of the poor is a safer investment than any other, because it is guaranteed by God Himself! “Whoever is generous to the poor lends to the LORD, and he will repay him for his deed.” (Proverbs 19:17)