Cryptocurrency: The best buying opportunity is at the bottom

*This content is brought to you by Jaltech

By Jonty Sacks*

The old adage, “it’s not about timing the market, but about time in the market,” has been proven true over the years. Having said that, one can’t ignore the buying opportunities across the markets. For instance, Uber, Tesla, Alphabet, PayPal, Airbnb, Meta, and Netflix are all down between 25% to 70% over the past 6 months. In fact, in my lifetime, the S&P 500’s performance over the past 6 months has never been worse. But as you move up the risk spectrum, the performance numbers are even more eye-watering.

The cryptocurrency market has experienced a huge sell-off, below will give you a sense of the performance of nine of the premier cryptocurrencies:

 All-time-highPrice on 5 July% Down
Bitcoin$ 67 566.83$ 20 193.78-70%
Ether$ 4 812.09$ 1 147.80-76%
Aave$ 632.27$ 62.41-90%
Uniswap$ 43.16$ 5.29-88%
Solano$ 258.93$ 35.44-86%
Chainlink$ 34.78$ 6.42-82%
Polkadot$ 53.88$ 6.93-87%
Polygon$ 2.87$ 0.51-82%
Litecoin$ 386.45$ 51.18-87%

What’s evident is that there has been a large sell-off on cryptocurrencies across the market, so much so that since its inception the Jaltech Cryptocurrency Basket is down 68% (note that the basket was up 60% in November). What most investors are asking themselves is whether the cryptocurrency market can recover. As evident from the below graph, seasoned investors will tell you that they have seen sell-offs like this before with significant rebounds.

The question that investors should be asking is “are cryptocurrencies undervalued at the moment?”    

To answer this question, I would argue that what is not evident from the price drop is the adoption rate of cryptocurrencies by investors and market participants who are using blockchain and cryptocurrencies (this will be my next opinion piece). Take the Ethereum blockchain network, Token Terminal reported that the Ethereum network generated R48 billion (R260+ million per day) in revenue over the past 180 days while Ychart is reporting that the network is exceeding 1 million transactions per day. Opensea, one of the largest NFT marketplaces, generated revenue in excess of R25 billion over the past 180 days and the list goes on.

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

Investors should be focusing on the network effects and adoption rates in the cryptocurrency ecosystem rather than on price movements while having the goal of capturing that growth over the long term via investment returns.

The key to investing in this market is to realise that the adoption of blockchain technologies is the fastest adoption of any technology in human history and price action does not always reflect this. Prices may be down, but adoption rates continue to climb as the above revenue and transaction numbers highlight. In this phase of the cryptocurrency market, I believe a prudent investment mindset is to focus on adoption rather than price.

This theory is supported by the below chart, illustrating that despite the well-known massive price fluctuations since Bitcoin’s inception, the number of wallets on the Bitcoin block explorer wallet has steadily increased over time – pointing to steady adoption despite movements in price.

What many naive people don’t realise is that the cryptocurrency/blockchain ecosystem is expanding at a huge rate, the question is, is today’s price cheap or not.

Jonty Sacks – Partner at Jaltech

Jaltech offers investors exposure to a basket of cryptocurrencies which is selected and managed by a team of cryptocurrency experts.

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

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