The crypto market has been declining recently, and the market sentiment has been sluggish. Most altcoins have shown decline. Although BTC -0.24%-news/">Bitcoin and Ethereum ETH -0.05% have halved, there are still investors who are confident in their prosperity. In this context, some analysts believe that now is a good time to invest, while some extreme opponents believe that the market will soon decline. Some technical analysts also pointed out that the market will see more weakness after a brief rebound, followed by a larger rise. With all the confusion, is now a good time to invest in cryptocurrencies?
Group diversity
In fact, different groups with different costs, different risk appetites, different values, etc. have very different opinions on whether it is a good time to invest in cryptocurrencies.
For example, different perceptions of the value of cryptocurrencies lead to different investment strategies. Bridgewater founder Dalio pointed out that the Fed is starting to “sell” because it has to fund high deficits, cash is junk, stocks are junk, the question is what will give you real returns, so our environment has shifted , just like in the 70s – as long as an asset that gives a real return, in whatever form, is the best investment, Bitcoin has achieved a great deal over the past 11 years – so it’s starting to gain a place in my portfolio.
By contrast, the Microsoft founder, the fourth-richest person in the world, said he did not invest in any crypto assets. Only invest in assets with valuable functions, he said. Gates believes that the value of companies is based on the production of great products, while the value of cryptocurrencies, in his view, is only based on speculation that someone will pay for them in the future. Gates has long been skeptical of cryptocurrencies.
In addition, different risk appetites also make people have different strategies. At face value only, if you’re willing to accept that cryptocurrency is a high-risk gamble that could pay off, it could be a good investment. But on the other hand, there is a good chance that you will lose all your money. Because the prices of cryptocurrencies, including Bitcoin, have been falling in 2022 amid a slump in cryptocurrency prices around the world. Different risk appetites prompt people to make different choices.
Investors who are a little bit concerned about cryptocurrencies should know that governments and financial regulators in almost every country warn investors of the risks associated with buying cryptocurrencies. And the risks do exist. When an investment starts to appear in headlines, ads or through celebrity endorsements as a way to get rich, investors flock to it without considering the risks.
Humans naturally like to get caught up in the hype of a narrative. We see this in politics, personal opinion, and society. The market is no different. In fact, this happens more with cryptocurrencies. As a result, the resulting volatility, false scams, false high-return schemes, and de facto uncompensated schemes and no guarantees frequently cost investors.
In addition, different costs also make investors adopt different strategies. In fact, most investors may suffer losses on a massive pullback, but it doesn’t seem to stop investors completely. For sophisticated investors, pullbacks like this are nothing new in the cryptocurrency space. In addition, although the enthusiasm of retail investors has faded, venture capital and fund investment in the crypto space are still deployed.
According to a new report from blockchain investment firm Crypto Valley Venture Capital (CV VC) and Standard Bank, as many in Africa continue to adopt crypto and blockchain, the first quarter of 2022 saw more venture capital flowing into the continent than in 2021. More in the first quarter. Reports suggest that blockchain startups will be able to raise $91 million in the first quarter of 2022. Compared with the first quarter of 2021, the cash inflow in the first quarter of 2022 increased by 149% year-on-year, and according to CV VC, the increase was more than 11 times. Although Africa has yet to see a “blockchain unicorn”, the report predicts that unicorns could be removed from the region’s cryptocurrencies within two to three years as more venture capitalists show interest in the region And the field of blockchain appeared.
At the same time, many investors have opted to invest in funds. It is reported that Fidelity’s bitcoin index fund investment has raised a total of 126.5 million US dollars, indicating that the overall growth is slowing compared to the previous reporting period. While the fund grew modestly in its second year, the number of investors has grown from 83 to 689. Fidelity recently announced that it will allow its customers to allocate a portion of their retirement savings to Bitcoin.
Bitcoin has been in existence for more than 10 years, so what will the crypto industry look like in another 10 years? Different groups have different expectations for the market outlook and different returns they hope to obtain. In addition to group differences, natural selection is different.
But if you understand enough about the value of crypto, where the risks are, and still interested in generating investment ideas. Then it is necessary to invest based on the facts, not the hype. Take a comprehensive look at whether this is a good option for you and your finances. Note: Any information or analysis in this presentation is not intended as investment advice and should not be relied upon as an investment decision.
Find out what the market has to say about cryptocurrencies
Are cryptocurrencies a good long-term investment? According to sophisticated investors such as banks, hedge funds and pension funds, the answer is yes. More of them are invested in cryptocurrencies, and investment banking giant JPMorgan suggested in February 2021 that investors could consider putting 1% of their investments into Bitcoin as a way to diversify their portfolios. However this investment advice is aimed at financial professionals, not ordinary investors with several thousand pounds of stock.
Investing in cryptocurrencies that are not particularly well-known or well-backed is fraught with serious risks. Most serious cryptocurrency investors would not consider putting their money into a project that is not yet known. The most important tip is to watch what sophisticated investors are buying. Pension funds or university endowments that manage billions of pounds of cash and specialize in long-term investments typically only invest in bitcoin. Bitcoin is the original cryptocurrency with high long-term value because it has never been hacked and has maintained 100% uptime since its launch.
Also, is Bitcoin a good inflation hedge? Investment professionals have been talking about digital currencies as a way for investors to hedge against inflation. When inflation rises, as it currently does, the value of cash in savings accounts falls over time. As the years go by, we can buy fewer goods and services with the money in our bank accounts.
Investment options touted as “hedging” — such as government bonds or gold — tend to either retain more value than cash over the long term, or tend to be immune to downturns in other areas of the economy. That’s why so much long-term investment advice has focused on moving cash from our bank accounts into assets like cryptocurrencies, which are likely to appreciate in value over time.
The promise of writing Bitcoin code is that more than 21 million Bitcoins will never be created. As a result, some experts believe that Bitcoin is not an inflationary currency like the pound or dollar, but the opposite: it is deflationary, appreciating over time.
Of course, the deflationary arguments in favor of Bitcoin will fail if the government decides to regulate it specifically. For example, India proposed a ban on cryptocurrency trading, suggesting it would impose fines on anyone holding any type of digital asset.
Regulatory uncertainty surrounding Bitcoin and cryptocurrencies in general is one of the key factors affecting investment.
It is worth noting that with the release of water since the pandemic and the impact of the recent Fed rate hike, we have seen the crypto market increasingly pegged to US stocks, which has also caused more and more investors to believe that Bitcoin is a risk asset rather than an inflation hedge. However, due to the fact that during many crises, encrypted assets have outperformed traditional risk assets such as stocks, and they are still the choice of many professional investors.
We can see that uncertainties in risk, regulation and even the macro environment are affecting the development of Bitcoin and the crypto market. Cryptocurrency is a good investor, and I’m afraid there is no one-size-fits-all answer. But if you want to invest, cryptocurrency investors should do the same due diligence as any other investment. Think hard about which cryptocurrencies have the real potential to change the world. Try not to be swayed by malicious people yelling “going to the moon” for this or that cryptocurrency.
