Will the crypto winter be over soon?

My colleague, Lois Vallely, recently wrote a brilliant cryptocurrency weekend essay and his experience investing in the digital asset. It took a £30 punt on Ethereum, the second most popular digital currency after Bitcoin, late last year.

At the time, Ethereum was trading at £3,456 and there was a lot of hype from influencers on social media that it would hit the £10,000 mark. Four months later, the crypto sector suffered its worst crash, wiping out $2 billion in market value. Ethereum’s value has fallen to £1,347.

Unfortunately, my esteemed colleague’s investment did not bear fruit. At the time of writing, the value of his Ethereum investment is £14.41. Ms Vallely rightly takes a dim view of the crypto market and has concluded that it is “mouth not pants”.

I sympathized with his ordeal. Hopefully she will list her loss as market research and claim it as an expense.

Despite his background, I have an opposite view of crypto. We love our polemics at Money Marketing headquarters. I believe in crypto and subscribe to the idea that it will modernize and democratize the anachronistic global financial system.

I also believe it will be a force for good and improve financial inclusion when it is universally embraced. Many people with access to telephones will be able to make transfers without involving third parties. This is because the technological system, blockchain, that supports cryptocurrency is inherently secure and digital.

On Monday (October 31) as the rest of the world celebrated Halloween, Bitcoiners celebrated the 14the anniversary of White Paper Day. On this day in 2008, Bitcoin inventor Satoshi Nakamoto sent an email titled “Bitcoin: A Peer-to-Peer Electronic Payment System” to a small group of developers.

The first line of the email has become cult, in the same breath as Magna Carta, within the Bitcoin community.

“I worked on a new fully peer-to-peer e-payment system with no trusted third parties,” Nakamoto wrote.

It was the sales pitch of a trillion-dollar market. One of the most iconic moments of this millennium. Bitcoin, which started life in humble beginnings as a hobby among a fringe group of tech visionaries, has taken the world by storm, threatening the existence of fiat currency.

It is the most sought after cryptocurrency investment. Large companies such as MicroStrategy, Tesla, and Coinbase are among the companies with the largest share of Bitcoin. Other well-known investment firms such as BlackRock also showed interest and joined the party late.

Nakamoto, the mastermind behind the first blockchain, has become a mythical figure. There are legends about the work of this person or people. No one knows for sure Nakamoto’s identity. Their creation would have made it the 15e richest person in the world when Bitcoin reached its highest value of over £60,000 last year.

Other early adopters of this digital gold rush have made fortunes from their investment. And most of them, mainly Gen X and Millennials, have been flaunting their wealth on social media while conducting online “how to get rich with crypto” workshops.

Crypto remains a high-risk, high-reward investment. No wonder critics called it a Ponzi scheme. If you do a Google search: “Is bitcoin a Ponzi scheme?”, you will get over 1.2 million results in less than 50 seconds.

There is huge interest in this digital gold, and people want to know if it is a safe investment option. Bitcoin is still out of reach for many small investors due to its exorbitant price.

But there is an appeal to its rarity. And many people want a piece of that golden cake. The market is now saturated with thousands of cryptocurrencies to meet growing global demand.

Like any other market, it has attracted scammers who try to take advantage of impressionable people. Over 46,000 people (and unfortunately counting) are said to have lost over $1 billion in crypto scams since last year. On average, an individual investor’s loss is around $2,600, according to data from the US Federal Trade Commission.

I think this is precisely why advisors say they won’t touch crypto assets with the proverbial bargepole. The Oracle of Omaha, Warren Buffet, reportedly called Bitcoin “a rat’s death” and “a unique worthless unproductive asset.”

And his friend, Bill Gates, made a similar move in the crypto market. He said the crypto bubble is “100% based on a dumber theory,” meaning the value of the asset depended on having enough people willing to pay more for them.

Some advisors are gearing up for crypto assets as a potential investment option for their clients. And companies in the sector are taking the initiative to help advisors in this area.

Schroders previously published a guide to cryptocurrencies and blockchain for advisors. The company recently took a minority stake in Forteus, the asset management arm of Numeus Group, a diversified digital asset investment firm.

The crypto sector is facing its darkest period since its inception. It is going through a turbulent time as crypto businesses face severe financial difficulties including bankruptcy. Many in the industry have referred to this period as “crypto winter.”

Whether the winter is long or short depends on many factors such as world events and investor appetite. But one thing is certain, crypto is here to stay and will boom again.

#crypto #winter #Crypto

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