Time – Do you have the patience to wait and to ride the wave?
Most of us probably noticed the price of any Cryptocurrency tends to fluctuate to a great degree in a given week. In fact, daily price movement can easily range from 3 to10%.
Like all new asset types, any news, be it relevant or not; be it true or not, will affect the price movement significantly. These occasional short-term crashes and market dips are risks that cannot be avoided. Therefore, both time and patience are equally important in your decision-making process. If you are expecting that cryptocurrency investment is a get-rich-quick scheme, you will likely be sorely disappointed. However, if you are an investor with a long-term view and time to wait, then your overall risk has already been greatly reduced.
The King of Cryptocurrency, Bitcoin, reached a high of ~$980 in November 2013 and then went down all the way in 2014, hovering around $200-$300 throughout 2015 and only came back to the same level in January 2017 (after waiting for more than 3 years!). But for those investors with patience to wait and no time constraint, Bitcoin increased by 15 Folds (1500%) in 2017. In early 2018, Bitcoin dropped 2/3 of its value to ~ $6,000 and has since rebounded off its low.
The 2nd largest Cryptocurrency, Ethereum reached ~ $390 in June 2017 but within a month, it dropped about 60% to $150. Can you accept your investment lose more than half its value within 1 month? You either panic and sell off at lost or if you remain calm, 6 months later in January 2018, it reached $1,380. Within a matter of weeks, it lost half of its value and has since rebounded off its low.
The 3rd largest Cryptocurrency, Ripple went from less than 1 cent USD to ~ $3.30 in 7 months and then loss more than 2/3 of its value within 1 month. Who knows how long would it take for the price to recover and when it does, sky is the limit!
From the 3 assessments above, we can easily conclude that:
- If time is of the essence, do not invest in Cryptocurrency;
- Similar to S&P 500 Stocks, the new peak prices of most reputable Cryptocurrencies have always been many folds more than the previous record price;
- If you have the time and patience to wait for months and even years or are looking forward to riding the next wave, Cryptocurrency investment is definitely an asset class worth considering.