Since the concept of blockchain was introduced via Bitcoin’s inception way back in 2009, this new market sector has grown into a multi-billion dollar industry and has minted many new millionaires whose early adoption of the technology has paid off handsomely for them. Their success stories have enticed many individual investors, institutional investors as well as hedge funds to use cryptocurrency investment as a method to build wealth.
However, cryptocurrency investment is not as straightforward for the uninitiated and the one important thing any new investor in the space needs to understand is the difference between holding and trading cryptocurrency.
Holding versus Trading Cryptocurrency
Holding cryptocurrency is not the same as trading cryptocurrency as the former involves just buying and ‘holding on to it for dear life’ no matter what happens, even when the price crashes. This is commonly referred to as “HODLing” in crypto. This method of investing in cryptocurrencies can bring one heartache as the price of crypto is very volatile and can rise and fall quite dramatically. This attribute has brought many into the space, with both traders and investors attempting to earn from trading this crypto volatility - to sell when price is high with a view to buy back when price falls and earn the difference. This investing method can be very lucrative if done correctly as crypto prices rise and fall repeatedly very often, making it the most suitable asset class for day trading.
There is no denying that crypto assets are the most volatile tradable instruments in the world as the bull market peak to bear market through price difference can be as large as 90%, and yet, crypto can still recover after falling 90% and make new all-time-highs when a new bull market resumes. For instance, Bitcoin has ever fallen to a low of $3,000 during the 2018 bear market but still managed to recover and make a new all time high of $69,000, breaking its 2017 previous high of $19,800. Hence, it is not late to buy Bitcoin, especially when you buy Bitcoin in a bear market.
What is Crypto Winter and How to Survive a Bear Market?
The period of time when the crypto market is in a downturn and prices keep falling is known as a Crypto Winter. Just like how in winter it is very cold and lifeless, activity during crypto winter is almost at a standstill and many investors feel the chills as they see the value of their digital assets plummet deeper and deeper into the red.
However, once an investor survives the winter, spring comes in the form of a new bull market cycle and prices rise phenomenally again to turn those paper losses into gains.
Is It Still Worth Entering The Market?
Is it still worth entering the market? Definitely. Especially so since we are currently in a crypto winter where prices are at a low level, which implies a low-risk of prices falling by a big magnitude compared to buying in a bull market. According to the Motley Fool investment website, as long as one is prepared to hold, crypto could be a good investment, and the best time to invest in crypto is during the bear market. One can then reap the rewards later down the road when the bull market arrives.
For traders, you can even short Bitcoin during a bull market when everyone is bullish and buy it back later during a bear market when everyone is bearish provided you practice good risk management and position sizing.
However, since we are already in a crypto winter, it may be safer to be on the lookout for opportunities to buy, rather than to short. Hence, the question, is it too late to buy Bitcoin, should be asked for the sake of wanting to buy, not for wanting to short it.
All the positives aside, investors will still need to understand the risks involved with cryptocurrency investment and be able to withstand the volatility and uncertainty, especially with regards to cryptocurrency regulation as various governments are coming out with new cryptocurrency laws which may affect their usage, trading and adoption.
Some critics think that government crackdown on crypto could derail the industry, while another group of naysayers think crypto is simply too volatile and speculative to be a proper investment. These skeptics do not recommend anyone to even buy Bitcoin.
However, the fact remains that cryptocurrencies as a whole ecosystem and not just Bitcoin, have survived government crackdowns and speculative activities very well over its history. To illustrate, China has been cracking down on crypto since 2015, however, the average return attained by investors who bought Bitcoin in 2015 and holding till now is still a whopping 14,000%, albeit with lots of ups and downs. It is not just Bitcoin investors making a windfall as well, investors in Ethereum have similarly reaped average returns north of 1,700,000% since buying ETH in 2015 when it first launched. So, in spite of crackdowns, “buy Bitcoin” still comes out tops in turns of investment returns over a mid to long horizon, beating even real estate investment in terms of percentage returns. This is why many astute investors have bought crypto as part of their portfolio diversification.
How to Start Investing in Cryptocurrency Now
On the Margex platform, one can both invest as well as trade the volatility of cryptocurrencies. With the ability to short crypto, Margex offers its users incredible trading opportunities to earn from both rising and falling crypto prices. Simply open a trading account at Margex by going to its website at https://margex.com/
Click the top right-hand corner to register for an account. After your account has been successfully opened, which takes only about 30 seconds, you may log in to your account to fund it.
Deposit funds into your account by clicking on the “Deposit” button (yellow box) as shown under the “Wallet” tab located on the top navigation bar. You may deposit in a variety of ways like Visa, Mastercard, or even in Bitcoin!
Once your account has been funded, you may start trading and earning!
How Much Should I Invest in Cryptocurrency as a Beginner?
While being a good investment asset, a beginner needs to understand that crypto is still a nascent industry.
Although major players like Bitcoin and Ethereum are gaining more real-world use cases, there is still a long way to go before they gain mass adoption. Hence, if you are a risk-averse investor, you need to ask yourself whether you will be able to stomach the loss should your crypto investment go to zero. We advise one to not invest more than what they can afford to lose and to assess their financial situation before their investment decision-making as there is no sure way of knowing how long their investment will yield the results that they want. A beginner should also try to only invest in fundamentally strong crypto assets with a well-established history to avoid falling into scams. They should always buy Bitcoin for a start, and to start small and slowly increase their investment as they learn more about the space. A long-term investor may even practice dollar-cost averaging to buy a fixed amount at regular intervals so as to lessen the effect of volatility on his portfolio.
However, the fact that crypto is still a long distance away from mass adoption is the precise reason why many investors are attracted to it as a way to earn generational wealth.
This is due to the technology adoption curve.
The Current Stage of Crypto Adoption
Many market participants have likened the crypto revolution to the technology adoption cycle in the late 1990s. This is because cryptocurrencies are borne out of blockchains, which are decentralised networks which become stronger and more useful the more participants they have. This phenomenon is called the network effect, in which the more people are involved, the better a blockchain becomes. Imagine a phone network, where if there were only two participants, they would only be able to ring each other. However, if the phone network has say, 5 participants, the benefits each participant could derive from it will be much higher as each will be able to ring 4 other people and even hold various group conversations involving different sets of participants. This is the beauty of the network effect - the growth trajectory of a network effect is exponential. Using the phone example, whenever one new participant joins the phone network, everyone else benefits more from that one new joiner. These benefits accelerate more rapidly over time as the network grows.
This network effect of crypto adoption is similar to the adoption of the internet in the late 90s and early 2000s, which has been steadily increasing at top speed.
The Global Macro Investor publication has put together a chart to help readers visualise at which stage the adoption of cryptocurrency is against that of the internet, which everyone is by now, very familiar with.
From the above chart, the current growth rate in total crypto users is outstripping the pace of growth we saw in internet users in its early days and puts crypto adoption today only at around the 1997 mark in internet adoption. Does this chart help provide readers with a clue to the conundrum, is it too late to buy Bitcoin?
The more users get on board, the stronger a network becomes. Hence, a crypto network, especially that of a leader like Bitcoin, can only get stronger and better with time. This chart is a good estimate of the future growth trajectory of Bitcoin and it obviously shows we are still not too late to buy Bitcoin. The same goes for other cryptos which have a high adoption rate.
Observers have also noted that, whereas the internet took 7.5 years from 1997 to reach the billion user milestone, Bitcoin appears on course to achieve that 1 billion mark within just 4 from that point, or by roughly 2025.This supports data published by Zumo Financial Services Limited which suggests that the health of crypto’s two biggest networks, Bitcoin and Ethereum, continue to add new users at a rapidly increasing rate. One can tell this by looking at the slope of the address growth curve of both BTC and ETH in the diagrams below.
How then do cryptocurrencies get adoption and how do we determine its value? The simple answer is use case. Bitcoin was created as peer-to-peer decentralized money. Ethereum tries to increase the number of use cases for blockchain by tweaking the bitcoin base code to allow for the hosting of decentralized applications, as well as enabling Ethereum with smart contract capability. Hence, while Bitcoin has its proponents, Ethereum has been widely touted as the blockchain with a higher number of use cases and thus, may eventually surpass Bitcoin in terms of market value after the mass adoption of cryptocurrencies sets in. By this account, it is not too late to buy Ethereum too.
Is It Too Late To Buy Bitcoin FAQ
Now that we have examined the potential of Bitcoin, blockchains, cryptocurrencies, and have compared them vis-a-vis the adoption of the internet, one should have a better idea whether or not it is too late to buy Bitcoin. Let us revisit the concepts we have learnt to help you apply what you have learnt to good use.
Is It Too Late to Invest in Crypto Now?
Crypto market moves in bull and bear market cycles. While it may seem that the price of Bitcoin has risen by a lot in percentage terms, after comparing the progress of crypto adoption with that of technological inventions like the internet, we found that we are still early in terms of getting to the mass adoption phase, which could mean that there is still a lot of room for crypto to grow. Hence, it does not seem too late to buy crypto right now.
Will Crypto Bounce Back in 2022?
This year, due to tightening monetary policy globally, crypto prices have fallen drastically as these two are inversely correlated. When money supply expands, crypto prices go up, and when money supply tightens like this year, crypto prices fall. Central banks around the world have been raising interest rates aggressively in 2022 to fight inflation, which has caused crypto prices to drop substantially. However, this tightening of monetary policy will not last forever and there are already hints from Australia and the USA that they may need to reduce the magnitude of future rate increases soon. This shift in narrative has already caused crypto prices to rebound off their lows over the past month. Thus, when global central banks stop raising interest rates, crypto prices could soar again. Most market experts expect this to happen around the end of 2022 or early 2023. Hence, there is a good chance that crypto prices could bounce back in 2022.
What Is The Smartest Crypto to Invest In?
Each crypto has its own merits and flaws, so it is hard to pinpoint a specific crypto that is the smartest to invest in. However, a potential investor can bear in mind some attributes that a good crypto should possess before making up your mind what to buy. The factors that can influence the price of a crypto asset are:
- Network Effect
The higher the number of participants in a crypto ecosystem, the greater is the benefit derived by all its users, and hence, the higher the market value of the crypto.
More participants in a network also ensures a higher degree of decentralization, where not a single entity can decide on the operations of the network, which is a plus point when assessing a crypto. The higher the amount of decentralization, the higher is the value of the crypto.
- Number of Use Cases
The number of use cases of a crypto is synonymous with its number of users, as a higher number of use cases would naturally bring more users to a crypto.
The longer a crypto has been in existence, the more tried and tested it has been, which gives users more confidence in its reliability. The longer and more unscathed the track record of a crypto, the higher is its value. In this regard, Bitcoin comes out as the champion, being the crypto with the longest history. This is why almost every crypto expert will ask a beginner investor to buy Bitcoin.
We hope the above article has been able to help you answer the question, is it too late to buy Bitcoin, and help you in your investment journey.