The world of cryptocurrencies has been bludgeoned by bad news, leaving many potential investors wondering if the space is too risky.
“Crazy profits have been made just about as much as losses in the industry. As a crypto expert, I wouldn’t advise anyone, least of all someone looking to dabble in the industry to sink their life’s savings in crypto,” said CryptoWhat’s Patrick Moore. “The risk is still quite high: 5% of your investments would be great, but not all of it.”
There are certainly upsides to investing in cryptocurrency, but many investors might not have the mental make-up required to hold digital assets when they experience wild swings of volatility. Jared Tendler, author of “The Mental Game of Trading” notes that FOMO, the fear of missing out, can impact how people trade and inspire them to make foolish decisions. With complex assets like cryptocurrency, there’s also danger from the Dunning-Kruger effect, which is the tendency for some people to overestimate their level of expertise.
“In the crypto market, that means inexperienced investors/traders become overconfident because they’re unaware of how little they know and are therefore unable to recognize their own incompetence,” Trendler said. “That makes them very susceptible to loss in the context of other more experienced investors/traders.”
Options For the Crypto Curious
Though various currencies are quite unstable, the real promise of crypto is in the technology behind those currencies. The blockchain’s transformative potential remains untapped. While individual cryptocurrencies like Bitcoin and Ethereum may fluctuate in value wildly and create high risk/high reward scenarios, the technology behind them has far more potential to be concrete rather than speculative.
Investors who are interested in entering the crypto space but not quite ready to take the plunge on a risky digital asset might instead find exposure to the innovative tech behind crypto in the Invesco Alerian Galaxy Crypto Economy ETF (SATO) and the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC), which both invest in the equities side of cryptocurrencies.
Even traditional financial spaces are seeing the possible utility of crypto technology, with governments seeking out best regulatory practices. While crypto has been tanking, blockchain-specific corners of the market, like gaming, have been doing just fine. In a message to shareholders, Animoca co-founder and executive chair Yat Siu wrote that “current market conditions will not kill Web3, the open metaverse, NFTs, or cryptocurrencies.”
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