Now that we’re fully twelve years into the age of cryptocurrency, 56% of Americans have used or traded crypto. Is it a good or a bad thing?
Usually I’d say there could be more adoption, but honestly, that’s a staggering number! Just for comparison purposes, a Gallup poll reported that 58% of Americans own stocks. The first stock exchange, the Amsterdam exchange created for trading shares of the Dutch East India Company, opened its doors in 1611. The New York Stock Exchange is a relative newcomer, born in 1792.
In other words, it’s not unreasonable to say that cryptocurrency reached almost the same level of market participation as stocks in 1/20th the time.
Things really do move faster in the crypto world.
Here’s the thing: I believe crypto may become even bigger than stocks. Crypto is both a currency system and an investment vehicle. It’s getting easier to buy, and to use, every day.
So when I see that 44% of Americans still haven’t even touched the crypto market, I wonder why. What are they waiting for?
Risk aversion is, of course, a huge factor. It ties into the second point I’ll make… right after the first.
Is it too late to begin investing in crypto to make a profit?
There is a kind of specter hovering over the crypto market, and it’s been there as long as bitcoin gained any mainstream attention. “Is it too late? Is all the profit gone?”
Here’s what I think…
Today’s crypto investor is pretty well-positioned. This was a bigger concern a year ago, when bitcoin was trading around $68,000. Then, it was like: “I missed the $2,000 boat in 2017, then the $3,000 boat in 2018, then the $13,000 boat in…”
This is a really common concern, and one of the biggest issues slowing new crypto investment.
Now, it’s true today’s first-time crypto investor can’t hope to make a profit comparable to the earliest adopters (unless they find the right altcoin). This is always and forever the case. Legendary investor Sir John Templeton was fortunate enough to “discover” grossly undervalued Japanese equities in the irradiated, apocalyptic post-World War II period. By the time the rest of the world caught up with him, the “easy money” had been made – undervalued became fairly valued.
We can no longer compare the cryptocurrency market to post-war Japan. But I think massive profit margins are still there. The cryptocurrency market is volatile, which is its blessing and its curse. Volatility means huge swings in price, both up and down. That can be a gut-wrenching ride for the speculator or day-trader, and even a disciplined investor with a long-term time horizon can be frightened right out of the market. The positive side of volatility is lots of opportunities to buy the dip.
Nonetheless, it’s easy to get caught up in Fear Of Having Already Missed Out (FOHAMO, my own coinage). Historical FOMO. If only I’d paid attention three or four or five years ago… The boat isn’t docked anymore, it’s just too late to profit with crypto trades, so you shrug and give up… And, before you know it, crypto’s volatility has swung the other way. And you’re kicking yourself again!
Which brings me to the second point…
Why are institutions more likely to invest in crypto than an individual?
Institutions view risk and reward differently. To them, missing out on being early or semi-early investors in something that’s going to be huge is the risk. They have no issue understanding cryptocurrencies and how they work, and frankly, having an issue probably wouldn’t deter them.
Institutions, as a rule, don’t make decisions based on feelings. Or emotions. Or conversations they have in the grocery store check-out line. Institutions tend to have a much more disciplined and procedural approach to investments. They tend to have a long track record, a lot of talent and a cold-blooded rational perspective on how profits are made.
Institutions know an opportunity when they see one.
The latest studies back me up on this – 74% of institutions plan to buy crypto, and the majority (70%) would’ve already invested in crypto if they had what they consider “proper services.”
Since so many institutions are already putting heaps of money into crypto, the rest see the writing on the wall. They want to get involved, but they want it to be easy – they want some bigger names to work with.
There isn’t really a lack of banks offering crypto services to institutions. However, corporations, like you and me, don’t want to change banks to get what they want. They’d vastly prefer their existing financial service providers just deliver what they want. (“I don’t just want what I want, I want to get what I want easily.” In this way, at least, institutions are exactly the same as individuals…)
In response, the legendary bank BNY Mellon recently began offering cryptocurrency custodial services to institutional clients. Now, their corporate clients can trade in crypto as with stocks, bonds and any other asset class.
This is a big deal. BNY Mellon has $40 trillion in assets under management! Imagine what just a tenth of one percent of those dollars made their way into cryptocurrencies… That could be the very boat the crypto-curious have been waiting for. (And if you’ve been waiting, getting started really is easier than ever.)
“Buy low, sell high” is classic investment advice. Most folks get it wrong. Stock, gold and crypto investors all too often buy in during the peak of a frenzy – and then sell when the line doesn’t keep going up. Remember, there’s always a buyer who’s willing to take those assets off the seller’s hands. Quite often, you’ll find a cold-blooded, hyper-rational institutional investor on the other side of those trades.
As the crypto market continues to grow, I want to caution all readers not to fall prey to emotion! Make a plan that’s right for you, and stick to it — heed the time-tested wisdom that every famous investor has told us time and time again.