The biggest issue with cryptocurrency is transparency. I’m not talking transparency in the sense that you must give up protecting your personal privacy and your financial transactions. I’m talking about calling a spade a spade. Would you be comfortable literally put most or all your savings into a class of assets that was basically invented by a mystery person with the value of the assets protected by almost nothing, no regulation in the market and valuation may frequently based on the actions of a few “whales.” I’m not just talking about Bitcoin and Ethereum, I’m talking about the other hundreds of billions in whatever possible pump and dump crypto coins that probably fluctuates more than most penny stocks. I’m not talking about stablecoins which are basically just a medium of exchange, I’m talking about the people who made their money by buying these coins when they were almost worthless now getting other people to buy these at extraordinary prices when none of the fundamentals with these coins really changed that much. You need to look no further than looking at what happened to the NFTs. How did that turn out?
The only thing I think is innovative regarding crypto is the blockchain technology. I think from an investmentability standpoint, if you want to invest in digital assets, domain names might be a better investment if you know what you are doing. Domains are basically something every entity on this planet might need if they plan to operate digital door front to the world. There are over 400 million domains already registered with an annual registration growth of about 7%. With AI, IOT, metaverse, punycode domains and virtualization of everything, demand for domain names will likely continue to grow in the near future. Although domain investing is probably not for everyone, domains have been around for nearly half a century and most people take domain investing as a serious type of activity because domains as an asset class actually have a lot of use cases. Cryptocurrency trading volume has declined significantly. With the vast majority of Bitcoin mining already complete hence less hype around it, likely more stringent regulations coming regarding, potential crime concerns, cryptocurrency speculations, possible liquidity crunch, possible global economic pressures and with many governments likely having their own digital currency soon, I think the financial pressure will be too much for the retail cryptocurrency “investors” to not think about selling and getting away from the asset class. When the retail investors are struggling, the whales probably will try to get out before all the retail investors leave.
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Digital assets investing: cryptocurrency (Bitcoin/Ethereum/stablecoins) or website domain names.
No one wants to catch a falling knife. You know what the scariest part is? The collateralization that have been happening for years. When the collateral is worth a lot less than the amount borrowed, margin calls and liquidation most likely will happen causing event more downward pressure in the crypto market. The other issue with crypto is valuation. When Bitcoin was only a few cents and few dollars it was just like a lottery ticket most people who were interested in it didn’t even bat an eye when buying it. Now that Bitcoin is literally in the high tens of thousands and previously was in the low hundred thousand dollar range, valuation become more important. There are no mainstream, consensus and concrete evaluation method for bitcoin and all cryptocurrency. People will frequently try to link valuable assets to cryptocurrency or make the scarcity argument, again, look at no further than what happened to NFT, a similar type of asset class.
Valuation typically requires some type of intrinsic value or a use case. In the case of cryptocurrency the intrinsic value is quintessentially none and the use case is marginal at best. Many of the biggest fans of cryptocurrency are usually the ones who have entrenched interests in the asset class. This is also a lesson to why you should try to avoid speculation. When you are so entrenched into something even if it’s sunk cost, human emotions rather than rationale and reasoning take over. Speculating is probably one of the worse things that a common person could do because even if they initially made money, they don’t have the discipline nor experience to know how to stop. Digital assets are definitely the future, it’s just the future is probably not in cryptocurrency in the current form as it stands. Literally having the “face” of the asset class as some anonymous person that owns a large amount of the asset class but almost never shows up is probably quite concerning to most reasonable, experienced investors.
I get that there is also stablecoins that sort of peg to some sort of valuable asset or currency. To me that functions more of a medium of exchange to allow one to transact in crypto payment than actual “investing” in it. As I have mentioned in a previous post, “most governments now either have or are exploring their own digital currencies. When you think about it, a decentralized currency won’t really work in the long-term without the backing of the centralized authorities for very rudimentary reasons. Almost everything that are considered highly liquid like gold and silver are essentially heavily regulated by the central authorities. Cryptocurrency might be a useful tool for those who care about their privacy for whatever reasons. I believe regulations are coming for crypto and it will likely require more streamlined tax reporting which will essentially limit the privacy aspect of the asset class. I personally would not bet on the cryptocurrency market to appreciate greatly in the long-term.”