How many times have you heard a story about a cryptocurrency investor who went in big hoping to capitalize on the short term – even going so far as to borrow money to invest more in crypto – and then came out with big losses? It’s a story told often because short term investors are easily caught in the volatility of the crypto market, while those with an eye on the future continue to watch their digital assets grow.
Take the case of Ethan Nguonly, a 22-yeard old who lost $80,000 between November 2021 and June 2022. Within that six months, Nguonly’s original investment of $30,000 plus $50,000 he borrowed on margin were lost, culminating in what he refers to as his biggest financial mistake.
But was it really crypto at fault here? The Security & Exchange Commission itself recommends against margin trading for potentially volatile assets. “The downside to using margin is that if the stock price decreases, substantial losses can mount quickly,” the SEC advises, adding, “Margin trading is very risky.”
When Nguonly got into crypto, Bitcoin’s price was approximately $58,163, almost the peak it’s reached so far. Within the roughly six months Nguonly held his investment, it decreased to $20,289 due to the fallout from FTX and the Fed increasing the interest rate to fight inflation. In other words, Nguonly picked a rough time to get in, overextended himself (in his own words), and then got out fast when the profits weren’t there.
If Ngunoly had held on for six more months – to approximately where we are today – the value of Bitcoin would have recovered by about $7,500. Granted, in his case, he needed to repay his creditors, but it goes to show that crypto stability exists more in the long term than in the short term.
Or take this hypothetical example: Investors who got into Bitcoin in June 2018 did so when BTC was valued at about $6,921. Six months later, the market dipped to $3,483, or about half its value. Certainly, people who cashed out then lost money. If they instead held on for the five years since June 2018, however, they would have seen the price of BTC quadruple – meaning their investments would have gone up dramatically, too.
It’s easy to point to a certain time period in the past and say “you should have invested then, when the price was low,” as if the opportunity has passed. However, if you’re looking at the long game and the many contemporary clues that the market is about to surge, and are prepared to treat cryptocurrency like the long term investment Forbes says it should be, then right now is always the time to get in.
To make the most out of your long term cryptocurrency investments, consider a Self-Directed IRA that allows you to invest in crypto while enjoying the tax benefits of an IRA, as recommended by Forbes. It won’t prevent the market from being volatile in the short term, but IRAs don’t typically allow early withdrawals without penalties anyway, so the everyday ups and downs won’t have an impact on your investment.
