Exciting, risky and widely misunderstood, cryptocurrency has been the investment story of the last decade. But, with their fortunes falling in 2022, are Bitcoin and all of the digital tokens that came after still investments worth making?
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According to a new GOBankingRates survey of more than 1,000 American adults, fewer than one in four people invest in cryptocurrency — and experts and industry watchers are seeing a lot of them making many of the same mistakes.
Overestimating Its Complexity
Most of the 76.66% of people who don’t invest in crypto avoid the investment because they don’t understand it. It is, after all, highly complex — but the same could be said for the stock market.
“Blockchain and distributed ledger technology can be difficult to understand, but so are most traditional financial products,” said Harry Clynch, a writer for Disruption Banking, a crypto-focused online financial publication. “Trading Bitcoin is no more difficult than trading on foreign exchange markets, for example.”
Yes, crypto tech is complicated and unfamiliar — but so are the algorithms behind Facebook and Amazon, and you don’t need an advanced degree in computer science to subscribe to Prime or scroll your newsfeed.
“The internet as a technology is complex. However, no one needs to understand that complexity; they just need to be able to use it,” said Edson Ayllon, product manager for dHEDGE, a platform offering social asset management on the blockchain. “Crypto is the same in this way.”
Lumping All Cryptocurrencies Together
Another common mistake is to talk about cryptocurrency as if it’s a homogenous investment. Just as penny stocks and index funds are oceans apart, so too are many digital coins.
“The term ‘crypto’ is very broad, and putting your money into Dogecoin or Safemoon is very different compared to the likes of Bitcoin,” said Louise Elizabeth Lowe, co-founder of Every Bit Helps, a website and YouTube channel that produces crypto reviews and tutorials. “You can look at Bitcoin and possibly Ethereum as your ‘blue chips.’ Then, once you start moving down in market capitalization, investments grow in risk, but also in potential reward.”
Playing the Short Game at the Expense of Long Gains
Clemens Rychlik, director of operations at the tech marketing firm Bourbon Creative, believes that the crypto revolution is currently in its infancy — just as the World Wide Web was 25 or 30 years ago — and today, like back then, many investors are missing the moment by chasing quick gains.
“What’s important to remember is that the evolution of blockchain today is comparable to where the internet was in 1995,” Rychlik said. “We’re still right at the inception.”
Instead of trying to flip trending coins quickly, investors should be searching for transformational, value-adding companies and coins that are poised to dominate in the decades to come.
Rychlik said, “If you had invested in the right internet project in 1995 — e.g., Amazon — and held on to it for 10-15 years — well past the dot-com crash — that’s where you earn truly incredible returns.”
Forgetting That Today’s Rock Stars Might Not Be Here Tomorrow
Also like in the ’90s, there are currently a whole lot of upstarts riding the crypto wave that won’t survive a culling event like the bursting of the tech bubble back then. The mistake is to chase the next hot coin instead of picking a winner that you believe can survive a long-term thinning of the herd.
“There is an abundance of crypto projects right now, including many that don’t really provide any legitimate value,” Rychlik said. “So, of course, not all of them will succeed. Natural selection on the market will eventually pick a few winners, but these will provide massive returns. Thus, it’s key to see the big picture, spread your investment and carefully pick projects with strong teams and robust solutions.”
Price Swing Panic
The GOBankingRates study showed that one in five people who don’t invest in crypto avoid it because they’re turned off by the market’s notorious volatility.
Extreme highs and lows are undoubtedly part of the game, but that won’t last forever and it’s not necessarily a bad thing.
“Volatility is necessary to weed out weakness in the market and build the stage for far stronger offerings,” said Alejandro Laplana, CEO of Shokworks. “Blockchain cryptocurrencies are here to stay long-term.”
Avoiding Crypto Altogether
The survey showed that the overwhelming majority of people — more than three out of four — avoid crypto investing altogether.
Some shy away because they don’t understand it, others because they don’t trust the regulation or security, others because they don’t think it has a long-term future or because it’s too volatile.
No matter the reason, sitting on the sideline while the crypto revolution is still on the 10-yard line just might be the biggest mistake of all.
“Unless you’re living in the Stone Age, cryptocurrency in 2022 should surely acquire some part of your portfolio,” said Jibran Qazi, an avid NFT trader, a blockchain industry veteran and an online marketer with MCPD. “While the crypto market is indeed risky, magnificent returns are made with higher risks.”
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