By I would suggest thinking long and hard about what your overall investment goals are. If you are looking to invest and take minimal risks and still generate a decent long-term return that will grow slow but steady over the coming years, then investing in the stock market is the way to go. If you are looking for a much more risky investment that has a far higher return potential, then cryptocurrency is likely the best investment that can generate huge returns at the moment.
Contrary to Popular Belief, There are No Guarantees with Crypto
The truth is, however, that most people fail to understand that cryptocurrency is by no means a guaranteed way to make returns. Some people who purchased Bitcoin in December 2017 will surely attest to this. Not only are they likely down on their investment, but many people who purchased at or near the all time high of $19,000 USD are down upwards of 50%. As of July 24th 2017, a single Bitcoin has reduced in value to under $8000 USD.
While most investors still consider Bitcoin an investment where profits are guaranteed, they are usually under this impression because they came into the market just prior to the incredible “bull run” (uptrend) that took place towards the latter half of 2017. During periods of such incredible gains, it is easy for people to assume that these types of returns will continue endlessly.
The bull market itself was caused by a tremendous uptick in mainstream adoption and as the technologies that back many cryptocurrencies became more well known. This, in turn, caused prices to surge as supply of coins is limited, in most cases, and the new money entering the sector helped to drive prices up. This then caused more people who feared missing out (FOMO) to join the sector and thus a pricing bubble was formed.
Most people who understand finances and financial markets knew that that kind of surge couldn’t last. It could only last until the point where new adopters had maxed out, and those thinking of joining the sector would see the growing costs as too high an entry point. That seemed to happen around Christmas and the markets have been correcting since.
The Future of Crypto is Still Bright
Though cryptocurrency is on a general downtrend, the overall markets have incredible potential. If you take the time to truly understand the technology and potential this technology will have on the overall social and financial landscapes, you would still see a golden opportunity to make a decent return. According to the World Economic Forum’s study into cryptocurrencies, they estimate the sector will hit a market capitalization of $10 trillion dollars over the next 5 years. The current level is around $300 billion and that means a potential 30-35x ROI to investors who look at crypto as longer-term investments, rather than get-rich-quick schemes.
Cryptocurrency is actually a great investment if done correctly, with goals and strategy in the forefront. Professional traders actually prefer this market due the huge volatility and ability to make money on the much bigger spreads.
For example, in the conventional markets, a stock may only go up and down a few percentage points in a single day. In the cryptocurrency markets, however, swings of 10% to even 30% are not uncommon. This means that well-timed trades can turn relatively small investments into huge profits when compounded over a longer period.
For better understanding, take a look at the following chart. We can see that volatility demonstrated over a single 24-hour trading period of Bitcoin.
If you had held Bitcoin through this 24-hour period you would have actually lost about 7%. If, on the other hand, you had actively traded, selling at the major peaks and buying in the major dips, you could have made a profit of around 5-10%, depending on how well you timed your entries and exits. This is called “day trading” and is extremely risky when not done by a professional. It is, however, highly lucrative if you have the time and education to pull it off. So, though many people who are holding Bitcoin will have likely lost during this downtrend, traders are able to make a profit regardless of which way the market goes.
What Kind of Investment Are You Looking For?
Getting back to the question, if you are going to simply put your money into either market and wait for returns, then you will need to choose what is more important to you and your goals. Is it a safe return of maybe 3-5% you are looking for over the next few years, or are you looking for a much more risky, higher return potential?
With cryptocurrency, if you buy at a dip in the market, like the current dip, chances are, over the long term, you will make a better return than the stock market. If, however, the cryptocurrency market gets over-regulated or the coin(s) you choose become outclassed by newer emerging coins, you can also lose just as easily.
A third option is to actively trade and maximize returns and minimize risks by entering and exiting positions more frequently. This entails buying when there are lows and selling into the highs. This is also very risky unless you have a strong understanding of financial markets and cryptocurrency. This will, however, be the most profitable of all strategies if done properly. Considering the potential and volatility it is not uncommon for a professional trader to make 5-10% per day doing this.
Seek Professional Guidance
Unfortunately, most people don’t have the financial or market understanding to actively trade or invest. The ones who try end up selling too early or buying too late. They actually end up losing more than if they had just held onto the coins they started with and in the end get frustrated, which compounds the problems. Trading requires a cool head and deep understanding of the markets, not to mention intuition and experience that can only be learnt through trading actively. More importantly, than all of that is having the correct information to make such trades.
For people looking to get the benefits of actively trading without the financial or market experience, publications like CoinBeat may be the answer. CoinBeat connects cryptocurrency investors with top-tier cryptocurrency professional traders, writers, researchers and analysts. By subscribing and checking back frequently to CoinBeat, you can mimic and copy the trading patterns of these traders, tapping into their skills and experience.
Get the latest news and even some insider information to help keep you in the green and vastly reduce your risk by improving your access to the information that is most relevant. This is a great option for people looking to maximize profits while minimizing risks in cryptocurrency investing, just like a professional would. It is also great for those looking to learn a little, first hand, on how to position trades and portfolios, the emerging technologies and cryptocurrency in general works.
All in all, cryptocurrency investments are great if you have a higher risk tolerance and believe in the tech. If not, and you are simply looking for huge profits and are worried about losses, cryptocurrency may not be for you. The stock market is far more regulated and safer for those types of investors. If you are a bit more risk tolerant and are looking for the most possible bang for your buck, it would be hard to find anything nearly as lucrative as cryptocurrency at the present time, especially if you are actively trading. Just remember information is key and make sure you subscribe to CoinBeat and stay ahead of the informational curve!
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