Over the past couple of months, a lot of people crawled out of the woodwork claiming to know everything there was to know about cryptocurrencies. More specifically, as the prices of the world’s biggest coins fell, they were happy to tell you that they always knew that cryptocurrencies would collapse. They’d also happily tell you exactly what they thought was wrong with cryptocurrencies.
These voices were the crypto-sceptic counterpart of the evangelists who insisted that crypto would replace fiat currency within months or those who rushed to buy Dogecoin because Elon Musk tweeted about it. The thing is, as with most things in life, it’s probably best to avoid the voices on the extremes.
In truth, cryptocurrencies aren’t about to disappear and have more utility than their sceptics would have you believe.
- Here to stay and driven by utility
First off, while the fall in the price of Bitcoin and other cryptocurrencies was undoubtedly sharp, it hasn’t been anywhere near as prolonged as some believed it would be.
It’s also worth bearing in mind that June 2022’s low price is still higher than the highest price Bitcoin had ever reached prior to early December 2020. By any reasonable measure, that doesn’t constitute an asset in freefall.
Another common criticism lobbed at cryptocurrencies is that they’re a solution in search of a problem. But that’s not true either. While things like buying pizza and houses with cryptocurrencies haven’t taken off the way that early evangelists thought they would, they are being used for payments. In fact, between July 2020 and June 2021, Africans received $105.6 billion worth of cryptocurrency payments.
One type of payment they can be particularly useful for is remittances. Globally, the World Bank expects the value of such payments to reach US$630 billion in 2022. For many people, in lower to middle-income countries and their families in wealthier countries, cryptocurrencies represent a more efficient and low-cost way to send money across borders than more traditional methods.
- Traditional investment rules still apply
There is, however, a lesson to be learned from the recent “crypto-winter” and that’s that traditional investing rules still apply. Just as many investors have rued not getting into Bitcoin when it was valued at tens of dollars rather than tens of thousands, others may have rued investing at its peak, only to watch it fall a few weeks later.
The investors who aren’t feeling that way? The ones who stuck to the fundamentals of investing and consistently bought what they could comfortably afford to. And just as passive investors outperform active investors over the long term, the same looks likely to be true of cryptocurrencies.
This approach also busts another myth about cryptocurrency: namely that you have to keep up to date with the minutiae of various coin prices. If you take a more passive approach, you don’t. Do you know which stocks your retirement fund includes? And if you do, how often do you check their stock prices? Unless you’re planning to make it a full-time income stream, why should you feel like you have to do that with cryptocurrencies?
- It’s far more accessible than you think
That ability to take a passive approach to cryptocurrency investments helps bust another common myth, namely that cryptocurrency investments aren’t accessible. While buying Bitcoin may have been challenging in the early days, it’s incredibly easy today.
In fact, we probably wouldn’t have been able to build upnup without the advancements made in the crypto and technology spaces over the past few years. The fact that people can invest set amounts every month or even by rounding up the money they spend on everyday things like buying groceries or petrol.
This also shows that you don’t have to have large cash reserves available to invest in cryptocurrencies, meaning that almost anyone can do so.
- Tuning into the cryptocurrency reality
Ultimately then, it’s clear that there are a lot of misconceptions around cryptocurrencies and investing in them. And whether you’re bullish or bearish on cryptocurrencies, it should also be clear that allowing these misconceptions to flourish isn’t in anyone’s best interests.
By instead taking a sober approach that acknowledges the full reality of cryptocurrencies and embraces their increasing accessibility, ordinary investors can still come out on top.
