Author: OpEd by Tarik Chebib, Chief Revenue Officer at Capital.com
Many people who missed out on the first crypto wave back in 2016/2017 are probably wondering if they are too late to the party. But with swarms of new people entering the crypto space during lockdown, cryptocurrencies have been surging again with October and November revealing new all-time highs for Bitcoin.
So, what are investors waiting for? Perhaps they think early adopters got ‘lucky’ with the timing and got in at the right time. But timing the market is difficult and there may be many reasons why investors may have chosen to remain on the sidelines. Maybe the spikes in volatility, which are typical of crypto markets, played a part? Maybe they heard horror stories about people losing their hard-earned money off the back of a wild volatility event. Whatever the reason, the fact remains that many investors have yet to break into crypto.
But what if I told you now, some of the same characteristics we saw in crypto during the first hype cycle, 5 years ago, are being seen in a completely new asset class?
You may have heard about NFTs, short for non-fungible tokens, but have you taken the time to look further into it?
At current levels, NFT prices seem manageable. While NFTs aren’t trading in pennies anymore, prices are nonetheless comparable to BTC when they were trading at a $2,000 and 100 ETH at $75.
If NFTs go down the same route as bitcoin and grow more mainstream, then we could see greater valuation levels for NFTs. There is already evidence of this with some NFTs selling for 10s of thousands of dollars while others sell for millions. We don’t know if NFTs will ever be as mainstream as cryptocurrencies like Bitcoin and Ethereum but we have been seeing companies like Facebook (or Meta Platform) pouring billions into creating virtual realities which could help push NFTs further into the mainstream.
So, the question now is what will investors do? Are they going to complain again in a few years that they missed out on the right opportunity and failed to act when NFTs were still in their infancy, or might they act this time? If their concern with crypto is that they are too late to take advantage of low entry levels or they think there is little room to grow anymore, NFTs may be one solution for those keen to invest in the burgeoning asset class.
However, before getting started, new investors should do their research. If NFTs really are in the same spot crypto was five years ago, chances are that it will also experience the same trajectory and a lot of NFTs may go up in price. But ultimately, it’s not about getting the right price – getting in is more important than getting the right price. Importantly, don’t invest any money you can’t afford to lose – we’re still very early, it could all crumble and go away. The risk is high but so are potential rewards.
But now to the real question. Why are there still people who haven’t invested in crypto yet? Whatever is holding them back is likely holding them back from getting into NFTs as well. If they are waiting for the perfect entry price, they could be stuck forever and never be part of this new world.
If they think prices in crypto are trading at all-time highs and they are waiting for better prices, they may have a point but what did they do when BTC dropped from USD60,000 to 30,000 a couple of months ago? They were probably waiting for even better prices, then on the way up they were kicking themselves that they didn’t buy into it when it was cheaper. So again, they didn’t act.
Opportunities exist in hundreds of coins but not without the higher risks. Shiba Inu had a tremendous run in October and is now one of the top 10 cryptocurrencies globally. Where do sideliners think the price of Ethereum is heading? Have they thought about buying shares in Coinbase, one of the biggest exchanges in the world instead of buying a specific coin? These are just some of the questions they should try to answer to get out of the mantra of staying on the sidelines.
The fact that holds true for all trading is that timing is everything. But timing the market is irrelevant if investors would not miss opportunities altogether.