Cryptocurrency bears have had a field day since the price plunge. Every social media platform and even mainstream news services have been overrun with negative commentary as cryptocurrencies gave back 50% or more of their gains over the last few months.
Even the mighty bitcoin nosedived from nearly $20,000 per coin to around $6,300 per coin in just a few weeks. During the price crash, even avid crypto bulls started to question the wisdom of holding onto newly their minted wealth.
What’s Going On?
Being such a young market, there is genuinely no history to determine what is normal and what is abnormal price behavior. One thing is for sure: volatility is the nature of the beast. The millions of new traders who entered the market during the massive uptrend loved the volatility when it was making 12-year-olds millionaires in a matter of months.
However, once the volatility turned the tables on the bullish masses, all the noobs panicked, declaring that the bubble had burst. Fueled by the sensation-seeking media machines, the panic selling resulted in downside volatility soaring and prices plummeting.
At the same time, those who understand how markets really work waited patiently for the ideal buying opportunity and bought at or near the cryptocurrency lows. These investors have been handsomely rewarded for the risk, as bitcoin has jumped by nearly 40% from its early 2018 lows. At the same time, ethereum has gained close to 90%, and ripple, the third highest market capitalization cryptocurrency, has almost doubled since the lows of the plunge.
I am entirely convinced that there is massive additional upside in the major cryptocurrencies. In fact, I will not be surprised to see the all-time highs taken out in the not so distant future.
Now is the time to buy cryptocurrencies. To be clear, I mean the 10 largest coins by market capitalization: bitcoin, ethereum, ripple, bitcoin cash, EOS, litecoin, cardano, stellar, iota, and neo.
Reason #1: Price Action
Markets never move in a straight line.
Many cryptocurrency investors became complacent as the significant cryptocurrencies moved higher month after month. No matter how bullish a market, prices never continue higher forever. There are always multiple selloffs during every bull market. Sometimes these selloffs are dramatic, like the one experienced recently in the crypto market.
However, based on the massive upward move, the selloff was par for the course and not even that dramatic when taken in the context of the explosive uptrend.
Simply put, selloffs are part and parcel of how markets really work. Just like in healthy markets, the buyers came back with a vengeance once the lows were in place. The price bounce we are experiencing right now is a very bullish signal.
Reason #2: The Changing Face Of Money
Money is already mostly digital. It’s not much of leap to imagine paper currency becoming obsolete. Every time you use a credit card, PayPal, or send a bank wire, you are sending digital information. It is the logical next step that money will morph into 100% digital form.
Cryptocurrencies represent the apparent first iteration of purely digital money. We already have widespread acceptance of smartphones, which will initially be the primary personal storage devices of the new form of currency.
Reason #3: Cryptocurrency Is Not A Financial Bubble
Naysayers and luddites like to call cryptocurrency a financial bubble. It is even compared to the most massive bubbles in history like “tulip mania” of the 1600s.
Make no mistake: bubbles do exist in many of the cryptocurrencies presently flooding the market. Even outright frauds and scams are rampant in a rush to riches. However, cryptocurrency as an asset class is here to stay. The reason is that, unlike the tulips of the 1600s, cryptocurrency solves many vexing issues and is part of an irreversible social and economic shift.
In other words, world-changing forces like globalization, the internet, and the ever-increasing interconnectedness of everything leads to only one conclusion: cryptocurrency will not be a short-lived bubble.
Reason #4: Widespread Acceptance
Every day I hear of greater real-world acceptance of cryptocurrency. The latest massively bullish news is that ripple just partnered with global banking giant Santander to use its technology to transfer money internationally. Additional news includes Nasdaq considering the potential of adding cryptocurrency to its exchange offerings and a variety of significant market financial institutions setting up trading operations based on crypto.
There is no question that the overall trend is toward mainstreaming the once-underground world of cryptocurrency.
Reason #5: Security
Barely a day goes by without news of a data breach or theft. Cybersecurity is a major issue of the 21st century, and the blockchain is the apparent solution to multiple flaws in the current paradigm.
No matter how sophisticated the old way of protecting data, hackers always seem to find a way to break in. The blockchain, by its very nature, is highly resistant to outside attacks.
Risks To Consider: Most cryptocurrencies today will not survive. It is the nature of technological progress early attempts at a new paradigm become obsolete. However, cryptocurrency as an asset class and the blockchain underpinnings could be a permanent part of mankind’s future.
Action To Take: Buy the dips in the major cryptocurrencies.
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