There has been a lot of speculation about whether it is possible to get wealthy from investing in cryptocurrency. There are also questions as to whether it could lose all the money. With crypto featuring in the news quite frequently, it is natural to wonder whether it is here to stay.
So what exactly are the long-term effects of crypto tokens? Is it wise to invest in crypto now? What are the associated risks? Read on to find out what strategists think the long-term potentially holds for cryptocurrency.
JPMorgan Global Market Strategist Jordan Jackson maintains that clients should consider the role crypto has in their portfolio. He believes that it is a good option for long-term holders who can handle the volatility.
The idea is that such investors can do well with crypto as a small part of their portfolio. However, he believes that it is a challenging experience for those trying to day trade in the market. If you are looking for significant gains in a short time, it is likely to be tough.
According to Jordan, there are undoubtedly many long-term benefits to cryptocurrency. He believes that the blockchain technology that forms the base of the token is up-and-coming. However, this is more likely to play out over a very long time. Thus, people trying to time the market and make perfect trades are likely to be in for a lot of volatility and pain.
This is incredibly valid in today’s environment. A lot of people are in search of opportunities to make easy money. With incidents like GameStop soaring, people have a firm belief that this is possible. This was seen in crypto tokens like Dogecoin as well. However, it would be wiser to buy crypto assets as a small part of your portfolio, hold them for the long term, and put them aside.
The trading debut of Coinbase on Nasdaq pushed crypto into adulthood. Now, this calls for a discussion on the long-term outlook. At MarketWatch Barron’s event in April 2021, several financial-market experts weighed the pros and cons of crypto. They also discussed their expectations and outlook for where crypto is headed in the future.
Market technician and founder of Fairlead Strategies, Katie Stockton, has pointed out that constant new all-time highs are a good thing. However, the recent loss of upside momentum supplements her view that the uptrend would become more gradual.
Tepper School of Business’s professor of finance, Bryan Routledge, added that crypto tokens are not limited to a particular use case. They are inherently an investment in new technology. So, crypto tokens are bound to have long-lasting effects on the global economy as well.
Routledge has said that this level of investment in tech has already happened in the dot-com bubble around two decades back. However, the difference lies in the fact that investing in new tech did not involve buying an asset.
With crypto, investing in new tech implies buying the token, not investing in a company. Routledge also pointed out that the dot-com bubble saw a lot of failed companies.
Crypto tokens are often compared to gold, citing fundamental reasons. However, the moderator at MarketWatch’s Barron event commented that there were also a few technical reasons for the comparison.
Since August 2020, ever since gold peaked and Bitcoin gave a breakout, gold has been underperforming for six of seven months till April 2021. At the same time, Bitcoin has been higher in six of those seven months. Therefore, crypto could be seen as a store of value. Gold has not progressed with the strong, risk-on take that markets have been displaying.
Steep uptrends in crypto tokens suggest that they are becoming risk assets that can steal buyers from gold. In fact, it looks like a good alternative asset class for the hedge fund community as well when compared to traditional hedging assets like gold.
Stockton maintains that cryptocurrencies are broadly in an “Innovator” stage, where there are many opportunities. However, enthusiasts will also have to deal with a lot of volatility. It is impossible to predict when the volatility will die down, as this field is likely to see many innovations, regulations, and so on.
Stockton believes that this new asset class will require some more time in order to be adopted. People will require time to understand how it works, how they can invest and so on. Thus, there is still a long journey ahead for crypto to become a medium of exchange. While traders can take advantage of it, long term investors will still have to weather the volatility if they hope to make good profits in the long run
Although crypto tokens are yet to prove themselves as an actual currency, there is some hope. This has fueled the “innovator” stage. All major developments are likely to fuel the volatility, and it remains to be seen whether crypto-assets can live up to the hype. However, with the introduction of Coinbase to Nasdaq and El Salvador seeking to make Bitcoin legal tender, there is a lot of optimism.
While crypto tokens are decentralized, the entire financial industry that has developed in its surroundings has given it a centralized feel. Routledge calls it “stunningly” centralized since people are not buying the tokens but liabilities through multiple middlemen.
If you intend to buy crypto tokens or invest in them, make sure to do your research. You will also need the patience to hold through tough times. It would not be wise to expect a “GameStop” style movement but rather a slow and gradual accumulation of wealth over time. It seems odd to have to bear the volatility and hope for slow growth, but that is the future of crypto as experts see it.