We Could Be Near Crypto’s ‘Hyper-Inflection’ Point — What Does This Mean for Investors?

Antalya, Turkey - April 25,  2021: Close up shot of alt coins cryptocurrency over computer circuit.
ozgurdonmaz / Getty Images

If you watch or read the news with any regularity, it can be hard to get through a single day without hearing some mention of cryptocurrency. Many stories focus on the incredible returns that some cryptocurrencies have generated for investors, while others proclaim that crypto isn’t really an investment class and that it has no real future.

Whichever side of the argument you fall on, it’s hard to argue that crypto has been gaining acceptance around the world, from El Salvador’s adoption of Bitcoin as legal tender to no less than Joe Biden announcing that the U.S. would look into creating a central bank digital dollar.

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Some analysts take this and other signs to mean that cryptocurrency is reaching a “hyper-inflection” point. But, what does that mean exactly? Read on to learn more.

What Is a ‘Hyper-Inflection’ Point?

Cryptocurrency’s “hyper-inflection” point, as described by analysts at Wells Fargo, is the point at which the asset reaches critical mass, when momentum shifts toward rapid expansion and acceptance.

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According to the Wells Fargo global investment strategy team, cryptocurrency might be very close to this point, similar to the way the internet exploded in the mid to late 1990s. Data from Crypto.com indicates that only about 3% of the world population uses cryptocurrency, but the number of users doubled from February to May 2021 alone.

If adoption rates keep rising exponentially — and world governments start to legitimize cryptocurrency — the hyper-inflection “point of no return” may arrive sooner rather than later. Then, crypto could be as much a part of the fabric of everyday technology as Microsoft Windows or Apple computers. 

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What Does This Mean for Current Crypto Investors?

Longtime crypto investors may be sitting on huge gains, but those who bought over the past year might be staring at losses of 50% or more on individual crypto positions. But, if we’re really nearing a cryptocurrency “hyper-inflection” point, it might be a good time for investors sitting on losses to average down and add to their losing positions. This lowers the average cost of a crypto position and positions an investor for additional future gains.

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Of course, this type of investing can be risky, as there’s no guarantee that any cryptocurrency will come back. Some may even eventually become worthless. But, if you have the risk tolerance for this type of investing, understand the risks and believe that the hyper-inflection point is really coming, it can make sense. 

How About for New Investors?

A coming hyper-inflection point would be fantastic news for new crypto investors, especially those who feel they have already missed out on the chance to invest in crypto.

By now, the whole world is likely familiar with the unfathomable 49 million percent gain posted by the crypto Shiba Inu in 2021. However, many of those same investors may not know that the crypto now sits an incredible 75% down from its 2021 high.

Know More: Shiba Inu Coin Price Prediction 2022

Many other well-known cryptos are also down 50% or more. If you believe in the long-term viability of cryptocurrency, that should be music to your ears. By scooping up cryptos at today’s lower prices, new investors might make out quite well if the anticipated hyper-inflection point is around the corner.

As with existing investors, however, you have to be sure that you understand the risks involved and that you don’t devote too much of your portfolio to these types of speculative investments. 

Potential Headwinds for the ‘Hyper-Inflection’ Point 

Many technologies and innovations approach the “hyper-inflection” point but never quite reach it, falling into the waste bucket of history. It’s certainly possible that cryptocurrency will never reach the point of global adoption, thanks to a multitude of factors. For example, governments may make their own digital currencies or even outlaw cryptos, roadblocks that could prevent a hyper-inflection point from ever happening. Or, cryptocurrencies may simply never prove to have great utility in everyday life, limiting their widespread adoption.

But as the old market axiom says, “That’s why there’s a market.” Some investors are betting that cryptos will break through and become the next dominant technology, while others see them as a passing fad and nothing else. Only time will tell who is right.

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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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