Where does Crypto go from here? (Hint: Up)

Where does the cryptocurrency go from here?! (Portfolio Management #3)

The last few months have brought on serious heartache for the wide majority of cryptocurrency investors. A wave of regulations, coupled with series of negative incidents (e.g., exchange hacks and SEC investigations) and increasingly unfavorable media coverage, have led to a an environment fraught with skiddish traders.

The net result is that cryptocurrencies have lost ~70% in market cap in the last 4 months off their highs. Brutal.

So is it over then...? Should I write off my tax losses this year!?

No.

If you truly believe in the long-term potential of blockchain, now is the exact wrong time to sell.

Here's why:

Why not? Cryptocurrency is following the classic tech cycle for disruptive technologies

New, disruptive technologies have historically followed a full cycle with respect to adoption:

1. Awareness
2. Hype
3. Pessimism (delayed advancement)
4. Widespread Adoption (realization of full potential)

Disruptive here is key because more established technologies tend to see a shorter gap between stages 2-4. Let's look at two stocks which have ridden the full cycle over the past decade though:

eBay

Amazon

After some initial hype, investors were HIGHLY skeptical of both eBay and Amazon. The claims were that eBay was just a fad with no viable LT technology and that Amazon could never be profitable. After the initial hype wore off, the FUD and short-sellers came out to play and drove both to flat/declining returns for the better part of 5-8 years.

But for those who stuck around or (even better) bought in during Stage 2, the returns have been astronomical. eBay has gone up 300% in the past few years and Amazon has risen a staggering 6100%!

Look familiar?

I do admittedly think we're in for a longer bear season than I'd like and could even see prices fall further. That being said, I continue to believe in the LT capabilities of blockchain. Given that, right now, I am very happy to HODL and continue to buy as I have liquidity come available.

Remember if you see this as a long-term INVESTMENT and not a TRADE, the potential outweighs any short-term gains you'd get from parking your $$$ elsewhere.

Thanks for reading! Please feel free to leave any comments, advice, questions, or thoughts below!