As stocks tumble toward a bear market, cryptocurrencies and even entire exchanges are crashing right alongside them. The stock market, however, has history on its side.
Bull markets fall into bear markets as the business cycle turns and then the market grows strong once again. Long-term stock investors, for the most part, can keep their money in play, ride out the storm, and wait for the inevitable rebound.
There is no such precedent for the storm that’s engulfing the crypto markets — but that doesn’t mean that digital coins can’t still be a good investment. Plenty of investors shunned crypto long before the current turmoil, and a recent survey by GOBankingRates of 1,037 American adults sheds light on some of the reasons.
While their concerns are certainly valid, the same can’t always be said for their logic, so GOBankingRates asked the experts to address their anxieties.
According to the study, a full 60% of the people who don’t invest in crypto avoid digital currency simply because they don’t understand it.
They’re wise to avoid investments they don’t understand, but like the bond market, the stock market, the real estate market and any other highly complex field that involves the buying and selling of assets, the knowledge needed to make sense of it all is there for the taking.
“Cryptocurrency in 2013 was too complex to understand because of the limited resources we had,” said Jibran Qazi, an avid NFT trader, a blockchain industry veteran and an online marketer with MCPD. “Fast forward to 2022 and we have full-length guides, books like “Blockchain Revolution” and tons of YouTube videos to understand the deep basics of cryptocurrency and the blockchain industry. If people will pre-assume cryptocurrency to be complex, then it will remain complex.”
More than one in four of the study’s respondents — 26% — don’t invest in crypto because they don’t trust its security. If they want to learn about security vulnerabilities, they should look to the data-leaking, fraud-inviting banks where they keep their cash.
“Bitcoin is the most secure payment platform that has ever been invented,” said Jenell McLaughlin, media director for Sarson Funds, a cryptocurrency investment education and marketing firm. “There has never been a hack of the Bitcoin blockchain. Smart contracts that are built on top of blockchains can have vulnerabilities and logic errors similar to any other software application. Over time, processes and procedures for building on top of blockchains will become more thoroughly vetted and there will be a reduced number of errors and issues.”
Exactly one in five of the study’s respondents don’t invest in crypto because they don’t have the stomach for the wild price swings that defined crypto trading long before the most recent market turmoil.
Roller-coaster volatility is hardly a figment of their imaginations, but those who lose the most to the market’s ups and downs tend to be those who chase big, fast gains. You can protect yourself from volatility with the same principles that apply to stock investing — diversity your holdings, avoid trying to time the market and pick winners that you believe in and hold them for the long-term.
“Volatility is mainly a problem for short-term day traders rather than long-term crypto holders,” said Harry Clynch, a writer for Disruption Banking, a crypto-focused online financial publication. “Those investing in crypto should not do so for short-term gains, but as part of a balanced portfolio that aims to yield long-term results.”
As with the internet in the early ’90s, there are still credible analysts today who simply don’t think that crypto has a future — and one in five of the study’s respondents cited that as the reason that they don’t invest in digital coins.
As proved to be the case with those naysayers in the early days of the World Wide Web, that’s a shortsighted position to take in 2022.
“Crypto has been dismissed as hype for many years, and it is still with us and growing,” said Clynch. “New technologies, such as the metaverse and NFTs, depend on crypto and demonstrate that it will have future use-cases. Crypto markets are becoming of a size and sophistication that makes it impossible to dismiss as a mere fad.”
Anup Kayastha, crypto expert and owner of CryptoProfitCalculator, agrees.
“The market is expected to grow three-fold by 2030, which would hit a valuation of $5 billion,” Kayastha said. “Brands and individuals would have to embrace the importance of the growing crypto market.”
Finally, 17.5% of the people who participated in the study are leery of the industry’s lack of regulation. Many of the experts who spoke with GOBankingRates feel like they have a point — but the silver lining of the current crisis is that the calamity that’s presently playing out will almost certainly lead to stricter oversight.
“Sound regulation is certainly required to protect consumers,” said Clynch. “We have previously covered how some unregulated crypto exchanges have not displayed sufficient rigorousness when it comes to compliance. That’s why it is so important for regulators globally to protect consumers from bad-faith actors, in a targeted and proportionate way. Crypto can have a bright future as a mature, regulated industry.”
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Methodology: GOBankingRates surveyed 1,037 Americans aged 18 and older from across the country between April 8 and April 9, 2022, asking eight different questions: (1) Do you invest in cryptocurrency?; (2) If you do not invest in crypto, why not? (Select all that apply); (3) How long have you invested in crypto?; (4) What is your main goal for your crypto investments?; (5) What percentage of your investments are in crypto?; (6) Which crypto(s) are you invested in? (Select all that apply); (7) How much have you profited from crypto (all-time)?; and (8) Which crypto exchange(s) do you use? (Select all that apply). GOBankingRates used PureSpectrum’s survey platform to conduct the poll.