This year has been a rollercoaster ride for the cryptocurrency market. While much of it has been spent in freefall, over the last few weeks we’ve started to see the broad selling disappear.
Bitcoin, the largest cryptocurrency in terms of market cap, made headlines in late June when its price fell below $6,000. To put that into perspective, it had climbed as high as $19,783.21 last December.
The move brought the crypto-bears out in full force, calling for the implosion of the entire sector. Some still believe all coins will eventually be worthless, but in order for that to happen we would have to see $298 billion of value completely wiped out. That sounds a little farfetched to me.
While bitcoin continues to garner the headlines, I’m keeping my eye on the fourth largest cryptocurrency — bitcoin cash. This coin, which boasts a market cap of $14.5 billion, is essentially a spin-off of bitcoin but with better technology. Unlike bitcoin, which is only capable of storing one megabyte of transaction data, bitcoin cash uses blocks (the units that make up the blockchain) that are eight times larger. That means more data can be processed at once, making it a far more valuable option.
Like bitcoin, this cryptocurrency has also rebounded from the late June lows. After trading down to $655 on June 29, Bitcoin Cash is up more than 25% to prices back above $830 just one month later.
Investing in Early-Stage Technologies
There has been an overwhelming amount of panic in the market as cryptocurrencies have remained in their downtrend, but this shouldn’t be all that surprising considering the magnitude of the drops we’ve seen in the asset class’ value.
While questioning a trend’s future in this kind of environment is understandable, the key to investing early in new, largely misunderstood technologies is not letting our emotions get the best of us. Despite the headlines and recent trading, I continue to believe in the long-term viability of blockchain and the large cryptocurrencies, and therefore I’m sticking around for the ride.
Remember, long-term trends — especially those in early-stage technologies — will always have boom and bust years before becoming mainstream. This year so far has been a bust, but 2017 was a major boom.
This up-and-down action may continue over the next couple of years, so as long-term investors, our best strategy will be to use the bust years as opportunities to buy coins at discounts and accumulate positions in names like bitcoin cash.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.
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