1 Reason to Buy Monero Right Now With $1,000, and 1 (Much Better) Reason Not To

Monero (CRYPTO: XMR) is surging, with its price rising by more than 100% during the past three months. That means the risk of investors experiencing crypto FOMO (fear of missing out) is very high.

And if the temptation is irresistible, there's at least one defensible reason to actually go ahead and buy a small amount of this coin. Of course, there's also a much better reason to sit on your hands, so let's take a look at both of the arguments.

Image source: Getty Images.

The bull case is that privacy will always have buyers

Monero is a privacy coin, which is to say that by default, its chain conceals the details of its transactions rather than broadcasting them on a public ledger like the vast majority of other cryptocurrencies do.

In terms of its technical chops, Monero uses a cryptographic scheme called ring signatures to obscure which wallets originate any given transaction. It also uses another feature, stealth addresses, so the recipient's address is not trivially linkable to past activities, which makes it a lot harder (but not theoretically impossible) to build a concrete map of who paid whom, for how much, and when. While similar features are likely technically possible to implement with a handful of other cryptocurrencies, Monero's brand is uniquely distinguished by the fact that it's the preferred privacy solution for a wide swath of different kinds of criminals. In a sense, that's a plus, as it means its features are attracting users who aren't better served elsewhere.

Thus, the bull thesis for this coin is that some people will always want privacy for their transactions, and Monero is a fairly straightforward way to send funds in a mostly private fashion, at least when it's configured and interacted with properly by the users. It might also appeal to investors who think the next few years will bring heavier financial surveillance and more politicized payment rails -- a very logical set of assumptions, given the state of the world today.

Either way, owning the coin in ample quantity is the only way to make use of its privacy features, and essentially that's the reason it might be worth buying $1,000 of today.

There's a better reason to wait

The problem that overwhelms the bull case for most normal investors is that Monero's privacy features are consistently opposed by financial regulators, who are in turn making rules and pressuring crypto exchanges, making the asset harder to access through mainstream exchanges.

For example, the huge crypto exchange Binance announced the delisting of Monero alongside several other privacy-focused assets a couple of years ago. Another major exchange, OKX, said in late 2023 that it would delist Monero, again reducing access to the asset. Yet another exchange called Kraken issued jurisdiction-specific delisting notices for Monero as well, explicitly tying the change to a need to continue meeting its local regulatory compliance requirements. So this isn't a concern that's possible to brush off; it's a real problem that could make Monero very troublesome for you to buy, sell, or even hold.

When fewer large platforms support an asset, it's obvious that fewer ordinary investors can buy it, and also that fewer financial institutions can touch it at all. In such an environment, it's still possible to get violent upside bursts, like what's happening right now, but the ceiling for its price is simply a lot lower. Furthermore, the experience of holding it is, without a doubt, far more likely to involve multiple headaches, even if the coin's price happens to be going up -- and that's not a claim that most crypto assets can make, despite how many other headaches they're generally capable of inflicting.

Plus, regulators are not necessarily warming up to privacy coins like Monero. If anything, it's the opposite.

The European Union's new anti-money laundering (AML) regulations, set to come into force next year, will explicitly prohibit financial institutions and crypto service providers from maintaining anonymous accounts and handling crypto assets that enable anonymization.

So don't buy Monero until that trend changes, if it ever does. If you do, your $1,000 investment might well be trapped, making it difficult or impossible to sell on the same platform you used to invest. That's a bigger issue than most investors are willing to sign up for, and with good reason.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Monero. The Motley Fool has a disclosure policy.