Cryptocurrency: When to invest, regulations and more…

*This content is brought to you by Jaltech

By Jonty Sacks*

There is no doubt that cryptocurrencies have seen remarkable growth over the past few years, with Bitcoin and Ether capturing majority of the market share. Spurred on by Blockchain technology and the creation of new and more interesting cryptocurrencies, the digital asset landscape is just now starting to ramp up.

Performance of the market

The performance of Bitcoin last year resulted in investors generating a 60% return, outperforming every asset class in 2021. Bitcoin is not an outlier, the cryptocurrency market’s total market cap grew by over 180%, over the same period.

Cryptocurrency Category 2021 Returns
Bitcoin Cryptocurrency 59.8%
Ethereum Blockchain technology 399.2%
Binance Coin Exchange Token 1,268.9%
Solana Blockchain technology 11,177.8%
Cardano Blockchain technology 621.3%
XRP Cryptocurrency 277.8%
Terra Blockchain technology 12,967.3%
Avalanche Blockchain technology 3,334.8%
Polkadot Blockchain technology 187.9%

Sources: TradingView, Binance, Uniswap, FTX, Bittrex

As reflected above, it’s not just digital currencies that saw large returns in 2021, blockchain technology cryptocurrencies realised larger returns and we expect that blockchain adoption will continue to rise for years to come.

Whilst adoption is a huge influencing factor for growth over the long term, we are of the view that in the short term, the introduction of regulations will rapidly boost the performance of a large portion of the large-cap cryptocurrencies.

Introduction of regulation

Governments globally are battling with how to regulate this borderless asset class but regulate they will. In a recent press release from the US government, indications are clear that the US will look to regulate cryptocurrencies as opposed to banning the investment outright. This development cannot be ignored as once the US regulates cryptocurrencies, many other countries will follow suit.

From an investor’s perspective, this could be a once in a lifetime opportunity to invest as once regulations are introduced institutional investors (pension funds, insurance funds, banks, investment houses) will be permitted to enter this market. This could lead to billions of dollars being added to the cryptocurrency market, which would see cryptocurrencies increase in value within a short period of time.

For information about Jaltech’s Cryptocurrency Basket, click here.

Where will institutional investors invest?

We predict that institutions will first look to invest in cryptocurrencies that have a large market share. Our view is premised on the fact that cryptocurrencies that have a large market share are more attractive than smaller more speculative cryptocurrencies for the following reason:

  • They are unlikely to lose a huge portion of their value overnight
  • Large-cap cryptocurrencies are traded in high volumes each day, thus ensuring liquidity / the ability to exit on short notice
  • Large-cap cryptocurrencies have already shown signs of market adoption and investor support

When to invest? 

The question is not when to invest but what do I anticipate the value of the cryptocurrency market to be over the long term. If you share my view that the market is still at the early adoption phase and will grow exponentially over the next 3 to 10 years, then timing the market isn’t as important as being in the market.

My view is supported by the fact that the introduction of regulations globally is a clear indication that cryptocurrencies are here to stay and if you buy into that theory along with the belief that digital currency and/or blockchain technology adoption will become increasingly widespread, then it makes sense to invest in cryptocurrencies soon rather than later.

The key is to only allocate capital that falls within your high-risk portion of your portfolio and only invest capital that you don’t need access to within the short term.

Disclaimer: The content above should not be construed as financial advice, for advice on investing speak to your financial advisor. In addition, I am a partner in an investment business that has an interest in cryptocurrency investments.

  • Jonty Sacks – Partner at Jaltech

Jaltech offers everyday people effortless and convenient access to the cryptocurrency market.

One of Jaltech’s investments is its Cryptocurrency Baskets which is tailored for investors who are looking for an investment option that provides investors with exposure and diversification across multiple cryptocurrencies.

For information about Jaltech’s Cryptocurrency Basket, click here.

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