Positivity bias is a psychological phenomenon claiming that people are more likely to believe that good things will happen. This has no grounds in reality whatsoever. It also explains why crypto traders are still optimistic after a dip that cryptocurrencies took during the previous year.
There’s another phenomenon called the survivorship bias. According to it, you believe one side of the story because you hear exclusively from people with similar experiences. You only hear about the crypto millionaires and never about those who squandered away everything they had on crypto.
So, with these two psychological phenomena in mind, does this mean that investing in crypto is a bad idea? Not at all!
Investing in crypto still might be a solid financial plan, just not for the reasons you think. Here are five compelling reasons why buying crypto might still be a great idea.
1. Potential for high return with a low buy-in
If you can find a coin with great potential and volatility, you can buy it for a small amount of money and make a sizable profit. Imagine buying $1,000 of Bitcoin while still $2-$3 each. How much would you have earned if you sold it at $19,000 in 2017? How much would you have earned if you sold it at $65,000 in 2021?
Is there a guarantee that you’ll find the next Bitcoin? Don’t be absurd; no one can promise you that and be serious about it; however, you can commit an investment so small that you won’t miss it even if it fails.
We’re talking about a dollar-value investment strategy. Here, you find a count you believe has a promise and by a specific amount. You buy $1,000 worth of crypto (we took an arbitrary sum here, in reality, you can go as low as $10), regardless of how many coins.
The best thing is that no amount is so tiny that the investment will be negligible. You see, in February of 2011, you could buy a single BTC for $10. This means that, hypothetically, you could have turned these $10 into $65,000. Sure, you would have to wait for ten years but name one other investment that will give you a 6,500% ROI (even over a decade).
All you need to do is look at some cryptocurrencies with high volatility and choose among them. While the risk is high, you don’t have to commit too much. The reward, on the other hand, could change your life overnight.
2. There’s a limited supply
The majority of cryptocurrencies have a market cap. This means that the supply is limited, and if you’re lucky enough to get a hold of a coin that’s on the rise, you’ll be controlling this supply.
The thing is that, unlike money or resources that are produced/extracted, there’s no making more of this cryptocurrency. Sure, as the coin’s value goes up, people will start trading in its fractions or its equivalent in fiat (similarly to what we’ve discussed with dollar-value trading); however, this doesn’t affect your supply. If you have 20 coins, you have 20 coins, which won’t change until you decide to sell.
There’s a reason why, by the moment you’ve heard about Bitcoin, it was already too late for you to make money this way. However, it was payday for the people who had already bought in. Naturally, they were quick to cash out (who wouldn’t).
They bought Bitcoin at $800 and sold it at $8,000. It was a deal of the century… until it went up to $19,000. At this point, people were eager to see it reach $100K, which it never did. Instead, it went down to $8,000. At that point, people who didn’t cash out at $19,000 must have been bummed out that they didn’t sell. Then, four years later, it bumped up to $65K.
Now, just think about the timeline we’ve so far presented in this article. These shifts took four years, ten years, etc. Just because a coin holds a certain value for a while now doesn’t mean it’s its final destination.
You need to pick your crypto, buy, and hold. Arm yourself with patience and trust in your own choice.
3. Stablecoins are on the rise
With the value of the crypto, it’s all about trust. So, the biggest break, and, by some, the most significant barrier to crypto growth, is its perceived volatility. However, what if it was just to disappear one day?
The purpose of these coins (by their design) is to maintain a value based on another (more stable asset). So, a stablecoin is often tied to the value of USD (sometimes even in a 1:1 ratio), making it far more trustworthy
There are many benefits to stablecoins:
- Greater trust
- Great accessibility
- Stable store of value
- High transparency
- Low transaction fees
So, how do these stablecoins tie into the volatile crypto we’ve previously described?
While it may sound strange, for many people, there’s not much difference between one crypto and another. For those less tech-savvy, it’s all Bitcoin anyway. Now, once stablecoin shows that it can trust one decentralized currency type, other cryptocurrencies will also benefit from this collective trust. When it comes to stablecoins, this is just a matter of time.
4. It’s getting adopted far and wide
Cryptocurrencies are incredibly useful. Businesses are adopting them at an astounding rate, and there are even hot dog stands where you can pay with your crypto wallet. As this trend grows further, cryptocurrencies will rise in significance. To buy crypto, people will have to obtain it.
This is great news for people who already have a supply since the price will skyrocket when everyone starts buying it.
Major businesses are some of the biggest adopters of crypto. Tesla, PayPal, Visa, Starbucks, Shopify, and Microsoft all made efforts to either integrate or adopt cryptocurrencies.
Practical applications of crypto and crypto-related technologies are too numerous to count. For instance, it’s near impossible to imagine the future of online finance or cybersecurity without blockchain technology. It’s impossible to separate the growth of blockchain from the growth of crypto.
Most importantly, most coins are tied to a growing trend or technology. For instance, you have meme cryptos, blockchain-based arcade games, cryptos with carbon reward programs, and much more. Each of these has something unique, something practical to offer, which is far more than you could say about most fiat currencies.
5. Cryptos are getting regulated
Potential investors dread the word regulation like it will somehow taint a brilliant idea. The truth is that regulation might persuade people still on the fence that this financial trend is legit and not some sort of a gimmick.
Just think about the regulation and legalization of anything. Think about the end of Prohibition. Did distilleries shut down? Of course not; this industry is still worth hundreds of billions; the only difference is the methodology and the ownership of the assets.
Being the early one to recognize this potential means that you’ll already be in the game when governments themselves start with massive crypto use.
Most financial experts agree that regulation might affect the market positively. For instance:
- A boost in legitimacy
- Higher consumer protection
- Reduced volatility
There will, however, be some cons to this, as well. Regulations are bound to stop the anonymity provided by crypto or at least limit it to a degree. The crypto taxes will be introduced or raised in scenarios and regions already in place.
Also, higher regulation always slows down innovation. This is both inevitable and a great shame.
In terms of the potential of investing in crypto, nothing has changed
Many people hoped they would get rich by investing in crypto. Some people managed to do it, while others failed. The problem is that while this enthusiasm has dropped, not much has changed.
Is there still a potential for you to get rich by investing in crypto?
Is this chance greater than it was before? No, not really. However, it’s not lower either.
All the arguments you believed in (in 2017 and 2021) are still valid. It’s just a matter of developing more realistic expectations and understanding what you’re getting into.