It’s been well documented that cryptocurrency has fallen from grace since the peak of January 2018 when Bitcoin was around $20,000 briefly. However, interestingly, only 0.2% of the population holds cryptocurrency and it’s been tipped that this could double year on year with its exposure through popular media. CNBC has reported that asset management group, Blackrock has set up a department to access cryptocurrencies and blockchain and its potential.
So, if many of the big boys are going to make a fast buck with their resource and know-how, it’s also a good time for you to investigate why to get involved. Don’t forget we’ve written about the common mistakes of a novice crypto investor which can help you avoid the basic and rookie errors before you get started!
1. Regulation is coming but don’t worry!
The SEC announced in America that cryptocurrencies such as Bitcoin are not securities is a welcome development and will allow for additional mainstream investment. This can be boiled down to the fact that companies and private client investors can buy the coins and tokens safe in the knowledge they aren’t buying a security giving more protection to their trading activity.
2. Cryptocurrency is identical to the forex market
One of the benefits of the fiat foreign exchange market is that its very liquid and open 24/7. The cryptocurrency market is no different. Banks and finance in “the city” are open Monday to Friday until 4:30 PM, whereas cryptocurrency exchanges never close. The 24/7 ability to access and trade digital currency is an important and often overlooked benefit when you need to access funds and trade in and out.
3. Traditional investments are boring and higher risk
Housing is not a sure bet and exposed to high tax requirements. Interest rates are widely acknowledged to be going up over the next 2-3 years if not in August and that will put a downward trend on gold and traditional safe-haven assets. Cryptocurrency may not have a reputation for safety but they are regarded as to be bullish in the long term but select wisely.
4. The potential is unknown and untapped
As mentioned, the market has, currently 0.2% adoption and has been doubling by 100% a year. At this rate, the potential and opportunity over the next ten years are vast but unknown. There have always been downturns, and there always will be because that’s trading and investing. The opportunity and potential upside should not be overlooked or undervalued.
5. Spread your eggs over many baskets
We have always said to diversify your portfolio and even use a variety of platforms to protect yourself. Cryptocurrency from a macro perspective helps to diversify asset classes, which has been influential for countries that have suffered from hyperinflation such as Venezuela and Zimbabwe. In short, this asset class can get people and countered out of financial trouble which will only aid the macro, global economy.
6. Don’t be scared of a downtrend
It’s exactly that – a downtrend. They have been before and will come again but crucially, there will be UPTRENDS. Cryptocurrency is this year’s bear market, offering investors an opportunity to purchase cryptocurrency at only a fraction from where it was trading January 2018. We mentioned the scaling in and out and this is a classic time to be an example. Currently, Bitcoin is 70% off of its all-time peak. Historically, Bitcoin has seen drops over 80% and bounced seven times to achieve all-time highs. There is no evidence to suggest this pattern cannot reoccur, but you would have more coins for a cheaper price if you research and act now.
7. Never underestimate institutional buy-in
There is a saying “The business of business is business.” When someone like Jamie Dimon, CEO of JP Morgan comes out and slates cryptocurrency, there is an agenda. Do not be naïve to major corporations and financial institutions wanting a piece of the money-making actions. If they weren’t before, they are definitely now and have been heavily in cryptocurrencies. These are significant steps taken by some of the most influential companies in the world and a testament that public sentiment can drive change and adoption. Watch this space.