In 1995, well-known American scientist and author Clifford Stoll published a column in Newsweek predicting the demise of the Internet. “Why cyberspace is not and never will be nirvana,” he argued. Today we know how wrong this assessment was.
Last week, a conversation about cryptocurrencies with some friends was based on whether they are good or bad investments to know what the experience of trading is like, what the amount invested and what profits were made. It didn’t take long to share the names of the platforms and create an account.
“It was the fear of missing out that made me invest. I’ve invested in four cryptos, two of which are deep red, but the overall portfolio is profitable. I still don’t understand the twists in cryptos. I base my steps on community posts on my platform and read on the web, ”says Christopher, a senior executive for a Dubai-based company who started investing in digital currencies last year.
Many investment decisions are often made to follow other people’s success stories in the hopes of inspiring someone else with our investment decisions. But any type of investment without understanding the product is a gamble.
One of the biggest drawbacks to this asset class is volatility. The confidence and convenience we have in fiat currencies does not exist in any cryptocurrency. Also, there are so many unknowns for retail investors.
Industry confidence is building, but it may take time. “I am very optimistic about cryptocurrencies. And the reason for my optimism can already be seen in the markets. The huge post-pandemic stimulus packages announced by governments around the world created inevitable inflationary pressures within fiat currencies. Cryptocurrencies offer the perfect protection against these negative influences. In the long term, only the possibilities of decentralized financing will guarantee sustainable relevance. This could give cryptocurrencies enough opportunities to assert themselves, ”says Khurram Shroff, whose IBC group has signed the largest Bitcoin investment contract with 100,000 Bitcoins to establish the Miami 2.0 Blockchain Strategy Foundation. One hundred thousand bitcoins are valued at $ 5.5 billion as of March 16.
Shroff’s optimism is shared by a number of hedge funds and institutional investors, including JP Morgan and even Elon Musk, whose company Tesla recently announced a $ 1.5 billion investment in Bitcoin. India, on the other hand, is considering banning the trade and use of cryptocurrencies.
“The current investment thesis for the majority of institutes is based on the assumption that Bitcoin will likely become a fully-fledged alternative investment asset in the long term. This results in significant outflows of gold and other such assets to Bitcoin. Therefore, the target price can be seen as rather presumptuous, ”says Vijay Valecha, Chief Investment Officer of Century Financial.
“A comprehensive regulatory framework from the major G10 central banks is the order of the day. Until major government agencies and central banks are on one side, the long-term scenario for cryptos will likely be influenced by negative news from the regulatory and compliance arena, ”Valecha added.
It is always recommended that you break the hype and focus on building wealth using proven resources. However, if you feel like testing waters on this front, don’t borrow money to invest. Get out of debt, make sure you have enough emergency fund savings and targeted investments in stocks, then maybe venture here. The bottom line is that you are investing in what you can afford to lose.