At the time of writing this article, we find ourselves in a difficult time for the global economy. As expected, the crypto markets are not immune to the general economic turmoil.
The optimism that has dominated the crypto industry for the past two years seems to fade. Should you start looking for other opportunities? As always, the advice about not putting all your eggs in one basket remains valid. But don’t be too quick to forego crypto either -- you may be missing out on some exciting opportunities.
Bulls Trapped Between Bears and Scams
In a bull market, almost any investment can be a good one as most of them get pulled upwards by the positive market trend.
When the positive trend reverses, fewer investments look like good ideas. But this is not necessarily a bad thing.
Let’s look at the scams that the crypto space has had to deal with when optimism was at its peak. When FOMO (Fear Of Missing Out) sets in, people will invest in almost anything, with very little or no due diligence. Thriving markets are a goldmine for scam artists.
On the other hand, when the positive market trend reverses, cooler heads will prevail. And cooler heads are known for making better decisions.
There is a saying that says ‘in the midst of every crisis, lies great opportunity. To differentiate between a fad or a scam and a great opportunity, you need to leave FOMO behind and bet on a cooler head instead.
A bird’s-eye-view of the crypto market’s future reveals that a period of such volatility was in fact much needed and even welcomed.
In recent years, we have seen a slew of overpromising and underdelivering projects in the crypto space. They were little more than a money-grab scam (if that). In a down market, investors are much more careful about where they put their money and this is good for the market as a whole. We will be witnessing a period of market cleanup, where many of the projects that do not bring any real value or that have grown unsustainably will probably not survive.
In my opinion, a sensible approach for any crypto investor would be to treat any opportunity with the same scrutiny you would treat investing in a start-up company.
Hindsight is 20-20. For instance, any investor wishes they would have invested $1000 in Google when they were first listed on the stock exchange. But who could have predicted their success some 18 years ago?
Think about how many other companies were listed at the same time as Google (now Alphabet) and tanked in the following years. Not every newly-listed company is a future-proof investment.
Most start-ups fail in their first years. Crypto startups shouldn’t be treated any differently by investors. Right now, the crypto developer community is still in a period of discovery for the best technical and commercial applications of blockchain technology.
Why are we all in such a hurry and follow the trends instead of picking projects we believe in, projects which can prove themselves? There's a fine line between pure gambling and investing. Where are you drawing that line in regards to your portfolio?
The end of blockchain technology has been touted at every high and every low of the crypto market and yet we see blockchain adoption growing. Better yet, it is expected to continue to grow. Blockchain technology is making strides to find its own place in the global economy and it will eventually find its correct valuation.
Blockchain is here to stay and in time we'll find out which are the winning crypto projects. Until then all we can do is take calculated risks and offer our support to the projects where we see the ability to grow a sustainable, scalable, and profitable business with long-term demand.
I am not a financial advisor and this is not investment advice. Consult a professional investment advisor before making any investment decisions!