Should you sell all of your crypto?
That’s the question many investors have been asking since it was announced that crypto is in a bear market. Simply put, a bear market happens when stock value rapidly declines by 20% or more. This is occurring across all markets, not just crypto, because of high rates of inflation, increasing interest rates, and fears of recession. Across the board, investors are worried about their money and whether or not they’ll come out on top.
Crypto has been under fire as naysayers question its ability to endure market volatility and the potential for recession. The biggest question investors must answer is not whether or not they want to leave their money in crypto but rather what value they expect to create and gain from their investments. When you invest in crypto, are you looking for a quick way to cash out or are you looking to invest your money in the future of decentralized finance? Your answer to that question will also be your definition of success in a bear market.
The bear market will not be so kind to those who invested in crypto to get the maximum cash out with minimal effort. To put it plainly: that’s a bad investment strategy, whether or not you invested in crypto. On the other hand, if you invested in crypto to advance the future of financial technology and expand the digital world, you might come out alright. Here are three reasons why the bear market hasn’t shaken my faith in crypto.
Companies are incorporating crypto into their business strategies.
Crypto isn’t on its way out. In fact, many companies are making moves to show the value and trust they have for crypto, even in a volatile market. Chipotle just announced this month that they’d accept crypto as a form of payment. Leading crypto companies are even offering high sign-on bonuses to incentivize investors. Companies are making shifts to make crypto more accessible and incorporated into business strategies. Even Shopify announced that shoppers will be able to buy NFTs through the platform. I believe crypto will continue to be a major part of the growth and development of businesses worldwide, which means that there may be significant value in holding onto the right assets.
Crypto has a high long-term investing potential.
A financial journalist for The New York Times recently pointed out that the United States has been in a recession 14% of the time since World War II. The report noted that fear is the worst motivator in financial decisions and has caused significant losses for investors over time. Those who invested in crypto with the goal of investing in the future of decentralized finance (DeFi) may benefit from sticking it out because crypto has a high long-term investing potential.
Crypto offers unique and varied opportunities for investors beyond more traditional stocks—and that is where its power lies. For example, one way that crypto can change the world is by providing incentives for people to use their money for the good of others, not just for their own financial gain.
Although traditional finance is at the crossroads in defining the intrinsic value of a crypto token and how it would act as a productive asset like investing in factories, housing, farmlands, etc., I believe novel methods of attributing value to a given crypto asset will emerge from value-accrual mechanisms that come from decentralization. In recent years, billions of dollars have been invested in crypto startups by top global venture capital firms as they realize the full potential of decentralized platforms, where collective ownership and governance rights lie in the hands of the token holders rather than a few powerful brokers. Decentralized finance represents an opportunity for the common man to own a piece of the global financial system and transparently capture value through novel mechanisms that are rapidly emerging in the crypto ecosystem.
These benefits strengthen the thesis that crypto will be an enduring asset for investors.
Downturns lead to innovation, creativity, and better ideas.
Billionaire Mark Cuban is a longtime investor in the digital space and recently compared the downturn of cryptocurrency to the beginning stages of the internet. At the start of the internet age, there was a great reckoning that revealed which organizations were trustworthy and reputable and which would not endure. He said the same will happen with crypto and referred to the Warren Buffet quote, “When the tide goes out, you get to see who’s swimming naked.”
Cuban went on to say that the downturn facing the crypto industry will ultimately lead to better ideas and more refined businesses. We’ve seen this happen thousands of times: Great innovation is built out of hardship. It’s the age-old metaphor about the refinement of gold: Heat brings the impurities to the surface, so the final product is more pure and valuable. The decline we’re witnessing in cryptocurrency will only yield a better outcome in the future. We just have to wait.
So, should you sell all of your crypto? My advice is this: First and foremost, use good judgment. Not all tokens are the same. Learn to identify quality projects based on remarkable innovations built by teams that are transparent and open. Then, determine what kind of investor you want to be. If you’re looking for a quick gain and a get-rich-quick scheme, then I understand your concerns about crypto’s steep decline—it doesn’t look like you’ll cash out anytime soon. However, if you want to be the type of investor that adds value to the market, pushes forward the future of finance, and takes the type of risks that can change the world, then hanging onto your crypto might be the best choice. Perhaps it’s time to take the meaning of “bear market” at face value and become like bears in our investments: Hibernate in the winter, and step out in the spring, ready and equipped for a season of prosperity.
The above is for informational purposes only, and you should not construe it as legal, tax, investment, financial, or other advice. Nothing stated above constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments.