With the crypto market tanking, and prices of many individual cryptocurrencies losing more than 90% of their value, why is the average retail investor still in this market?
An industry in deep suffering
As crypto nears or perhaps is already at its capitulation level, many retail investors are still hanging on in there or are trying to catch the falling knife by investing at a potential bottom.
Politicians and leaders of traditional financial institutions appear exasperated when asked for their opinion on crypto. Many of them decry the awful fraudulent practices of a market that has no real regulatory oversight, and call for the heaviest regulation in the quickest time possible.
But what about the average retail investor? Why are they still here after a year now of steady downwards price action? Why on earth would anyone want to invest their wealth in an industry that could even be dying?
Bitcoin miners are turning off their machines as it becomes more unprofitable to continue mining. Cryptocurrency exchanges are suffering bank-run type events that bring them crashing down in incredibly short amounts of time.
All the ensuing contagion spreads across the crypto space and like a pile of dominos, many projects are brought down in the resulting conflagration.
The alternative options
So with all this said, the average Joe and Jane are still in crypto because for many of them, there is no other place to go. In traditional finance accredited investor status keeps anyone out of any decent investments who is not already a millionaire, and the stock market is still so overbought that there is much potential downside left to go.
Staying in cash isn’t a great option considering the high rate of inflation, although it must be said that very knowledgeable fund managers are doing exactly this, with the view to buying cheap when the market bottoms.
Still, retail investors probably aren’t on the level of fund managers on their knowledge of markets, and they certainly wouldn’t have the same fund allocation. Instead, they are just looking to try and keep their heads above water and to attempt to keep up with inflation as best they can.
Precious metals are possibly an attractive investment. Gold and silver have withstood the test of time and history tells us that they generally outperform the stock market in periods of recession.
However, the issue here is that both gold and silver are becoming ridiculously difficult to get hold of. The world’s major mints do not appear able to keep up with demand, and therefore bullion dealers are mostly out of stock.
Paper ETFs are arguably not a good place to buy exposure to precious metals because of their counterparty risk, and some would say that the spot prices are heavily manipulated, and have been so for many decades.
It all comes down to crypto
So it all comes down to crypto. Many cryptocurrencies will certainly be scams, and others will just not be able to keep afloat. However, the best minds from across the planet are continuing to build out various projects that could well form the future of finance.
The headwinds of mainstream media negativity, the current bear market, and incoming regulations that are likely to suppress crypto innovation, will be extremely difficult to navigate for the industry.
Nevertheless, at least for the time being, this is a sector that the people can invest in. For some, it might just be a place for wild speculative bets, but for others it is a hedge on the future.
With governments and their central banks looking to close down all avenues to wealth and to coral everyone into using their central bank digital currencies (CBDCs), the future is looking rather grim.
Whatever its downsides, crypto has always been an answer to the excesses of the banks and the failing financial system. It is potential freedom, and many will continue to back this ideal. Given the time, it might well succeed.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.