As recently as 2017, cryptocurrency was seen as a speculative extravagance. CEO of JPMorgan & Chase, Jamie Dimon famously said, “If you’re stupid enough to buy it, you’ll pay the price for it one day.” Fast forward to today and cryptocurrency is a new and emerging asset class. Traditional money managers and wealth advisors are embracing adding cryptocurrencies to investment portfolios with a few caveats.
While these traditional financial experts recommend sticking to the most popular cryptocurrencies like Bitcoin and Ethereum, cryptocurrencies such as Stellar Lumens, XRP, Cardano, and others have been gaining traction with their proposed utility and use case. These traditional experts also advise that because of the volatility of cryptocurrencies, they should be considered a high-risk asset class and should be managed accordingly given the level of comfort and knowledge one may have trading on the crypto market.
Also, money managers generally recommend playing the long game with cryptocurrencies as an ideal strategy. The power of long trends comes into play as cryptocurrencies are gradually adopted by the mainstream. Some of the biggest and most innovative companies are buying cryptocurrency in bulk. To date, Tesla, an S&P 500 member bought $1.5 billion worth of Bitcoin, and digital payments company Square acquired $170 million of Bitcoin as well. Corporations are leading the charge of the early adoption trend which moves the market’s virtual embrace of cryptocurrency. The chorus of corporate support is growing.
For the individual investor, however, cryptocurrencies bring the aspect of trust in government and financial institutions into focus. In an interview with U.S News, advisor to the Golem Network, a decentralized cloud computing network, Maria Paula Fernandez said, “Investing in Bitcoin and Ethereum are natural ways to minimize the trust layer in governments and institutions that have failed to look out for the public and protect individuals from the fragility of traditional financial systems as they are both assets that do not require central parties to verify, create or administrate them.”
Diversification is the key when building portfolios. During this time of inflated stock prices and the apparent beating the stock market is enduring, cryptocurrency has become a worthwhile consideration among investors of all ages. For investors who are used to keeping a large portion of their portfolio in cash, cryptocurrency helps avoid too much exposure to the pitfalls the U.S currency may undergo.
Cryptocurrency is a unique asset class. With legitimate projects, the well-defined scarcity in supply and slow release over time are qualities that investors can depend on that offer some relief from government control.