“Wow!” is the only appropriate expression for the wild cryptocurrency ride over the last year. Bitcoin soared from around $1,000.00 at the start of 2017 to a high of over $19,000 on December 18, 2017.
Other cryptocurrencies like Ripple and Ethereum exploded with even more power. Ethereum moved from around $10.00 to over $1,300.00 in a year’s time. During the same period, Ripple went from pennies to over $3.00 in a similar mind-blowing move.
These massive moves created instant millionaires from small-time investors. Everyone from the barista at Starbucks and Uber drivers to hedge fund managers and corporate executives were talking about and buying cryptocurrencies.
Next, the inevitable happened as prices started to decline. The massive crypto bubble began to unravel as prices plunged lower.
Late-stage investors were left speechless as their “can’t lose” investments just kept dropping. Terrified of further losses, many of these first-time investors rushed to dump their holdings, exasperating an already dire situation.
Declines of 50% to 75% from the highs shook the crypto market to its core.
But a bottom was found, with prices rocketing back from the lows. In fact, many cryptocurrencies have doubled from their recent low prices over the last several weeks.
Does this mean that now is the time to buy?
YES! Here are five reasons why:
- The Market Is Still In Its Infancy
Cryptocurrency is less than a decade old. Bitcoin was launched in 2009, and other major crypto names are far younger. By way of comparison, the New York Stock Exchange began in 1792 and commodities have traded for many centuries.
Volatility is the hallmark of a new market. As exchanges and investors adjust to the new products, massive price swings are inevitable. This is why, despite my bullish bias, I say to only risk what you can afford to lose when investing in the novel cryptocurrency markets.
As the market matures, volatility will decline to create smoother equity curves for investors in both directions. Make no mistake, the inevitable decline in volatility will take much of the enormous profit potential out of the nascent market. This is why now remains an ideal time to buy despite the high risk for extreme return-seeking investors.
- Regulations Are Not A Bad Thing
There is a broad fear among cryptocurrency adherents that regulations will ruin the market.
Many of the early adopters and creators of cryptocurrency have a strong anti-authoritarian, anarchist bias. In other words, these folks hate the government, regulations, and anything that interferes with the free market.
The early adopter’s utopian worldview — the dream to live in a world where everyone interacts fairly and peacefully — remains nothing but fantasy in the real world.
As unfortunate as it may be, regulations are a must for a smooth and fair operating exchange.
The anarcho-capitalist movement that spawned cryptocurrency, and the underground commerce sites like Silk Road, is quickly becoming less of a factor in the growth of cryptocurrencies.
A strong argument can be made that regulations are a must for the continued success of the crypto market.
The fear-based selloffs triggered by regulation announcements and rumors create ideal buying opportunities for savvy investors. An example of this was the steep sell-off that occurred when South Korea announced a slate of regulatory measures. The move was way overblown, and crypto quickly recovered from the selling. This happens again and again, creating an exploitable pattern.
- Real World Applications
Crypto has moved away from the anarchist’s preferred means of exchange into the mainstream. However, it is not entirely mainstream enough to squash the upside potential. This means now is the time to buy before it’s too late!
Everyone knows bitcoin is being accepted at more and more locations around the globe. Since it was the first mover in the space, it is the leading cryptocurrency and has gained relatively widespread acceptance in the real world of commerce.
Other crypto projects like Ripple serve to transfer fiat currencies around the world. Crushing legacy systems like SWIFT regarding time and cost, Ripple is the leading player in the conversion of money transfer systems into the digital age. Rumors abound that even Starbucks (NYSE: SBUX) has plans to accept Ripple and Litecoin as payment within the next five years. Should Starbucks come on board, expect a massive move by retailers in this direction.
Ripple is just the tip of the iceberg coming to real-world applications of the blockchain and cryptocurrency.
- Bigger ICOs
Initial Coin Offering (ICO) has become a favorite way to raise capital over the past year. Often built on the Ethereum network, ICOs use vast numbers of tokens which, in turn, increase the demand for Ether, the cryptocurrency of the Ethereum network.
These types of offerings have reached the billion-dollar stage with Telegram, a messaging app, and the old school company Kodak both recently announcing plans to launch ICOs.
We will only see ICOs grow more extensive and more legitimate over time, increasing demand for Ether and other backbone blockchain network cryptos.
- The Banks And Institutions Are Coming
Primarily a retail investor phenomenon, cryptocurrency has attracted the interest of major institutions, banks and hedge funds. Multiple cryptocurrency hedge funds are springing up around the world, increasing the demand for the cryptocurrency. At the same time, considerable institutional money is starting to flow into the space. Attracted by the high return potential, institutions are in the early stages of accepting the asset class.
The amount of institutional money available for the new market is staggering. Should institutions, banks, and hedge funds embrace digital currency, the upside is truly unlimited.
Risks To Consider: Enormous hazards exist in the crypto sector. Even if blockchain becomes the standard method of doing business, the majority of cryptocurrencies will still fail. The latest statistic that I am aware of puts a 70% failure rate on IC0s launched in 2017. Only invest money you can afford to lose — no matter how much you believe in the market!