Here’s Why I’m Putting My Crypto Investments on Hold

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I’m not sell­ing, but I need to focus on oth­er finan­cial goals.


Key points

  • It’s impor­tant to ensure high-risk assets like cryp­to only rep­re­sent a small per­cent­age of your portfolio.
  • There’s a lot of uncer­tain­ty about reg­u­la­tion and the econ­o­my that could cause cryp­to prices to fall even further.
  • Cryp­to investors should­n’t ignore the dark­er side of the industry.

I’m pas­sion­ate about cryp­tocur­ren­cy and opti­mistic about the way Bit­coin (BTC) and blockchain tech­nol­o­gy could even­tu­al­ly trans­form whole indus­tries. I have con­tin­ued to buy cryp­to dur­ing the ongo­ing mar­ket slump. But more recent­ly, I’ve paused my cryp­to pur­chas­es, at least for a lit­tle while.

To be clear, I’m not sell­ing any of my exist­ing invest­ments. I plan to hold for at least 10 years, and prob­a­bly more, and I’m earn­ing decent rates of inter­est on many of my cryp­to assets. How­ev­er, for me, it’s a good time to take a step back. Here are four rea­sons why.

1. My portfolio is out of balance

Many experts rec­om­mend that cryp­to make up only a small per­cent­age of your port­fo­lio. And they are right — this is a high-risk asset class that may col­lapse com­plete­ly. How­ev­er, I spend most of my days read­ing and writ­ing about cryp­tocur­ren­cies, and I some­times get a lit­tle too enthu­si­as­tic. Espe­cial­ly recent­ly when prices have been low, it’s tempt­ing to pick up a lit­tle more cryp­to each time they slump further.

Cryp­to cur­rent­ly rep­re­sents about 20% of my port­fo­lio, but I don’t want to sell any of my cryp­to. Instead, I’m going to stop buy­ing dig­i­tal assets while I focus on build­ing up oth­er parts of my port­fo­lio, par­tic­u­lar­ly equi­ties. I also had to dip into my emer­gency fund recent­ly, so top­ping that up is a pri­or­i­ty. I’m com­fort­able with my cryp­to invest­ments, but now I want to focus on oth­er things.

2. I want to see what regulation will bring

Cryp­to reg­u­la­tion is a divi­sive top­ic. Some believe it goes against the decen­tral­ized ethos of cryp­tocur­ren­cy, while oth­ers think it is essen­tial if the indus­try is to mature and flour­ish. I fall into the lat­ter cat­e­go­ry. But there are a lot of caveats, pri­mar­i­ly that we sim­ply don’t know how harsh the impend­ing reg­u­la­to­ry frame­work will be.

We’re in a reg­u­la­to­ry wait­ing game. Many coun­tries rec­og­nize the need for more cryp­to rules, but have yet to decide what shape they might take. Clear and well-thought out reg­u­la­tion may build investor con­fi­dence and shore up the indus­try’s foun­da­tions in the long term. Unfor­tu­nate­ly, in the short term, there’s a good chance any increased reg­u­la­tion will hit prices hard. Added to which, there are no guar­an­tees the even­tu­al frame­works adopt­ed by indi­vid­ual coun­tries will be cryp­to-friend­ly. With such a big cloud hang­ing over the indus­try, I don’t want to buy more cryp­tocur­ren­cy until it passes. 

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3. The market may well fall further

Reg­u­la­tion isn’t the only cloud hang­ing over the indus­try. Infla­tion rates are high, the Fed­er­al Reserve is pulling back on its pan­dem­ic-relat­ed eco­nom­ic stim­u­lus, and the Rus­sia-Ukraine cri­sis shows no signs of stop­ping. Many econ­o­mists warn that a reces­sion is very like­ly, and we don’t know how that will impact the cryp­to industry.

The con­di­tions that drove the extra­or­di­nary growth in the cryp­to mar­ket in the past two years are well and tru­ly over. If prices con­tin­ue to stag­nate or fall fur­ther, there’s a chance many pop­u­lar cryp­tocur­ren­cies could fail. I under­stand the log­ic behind the advice to “buy when there’s blood in the streets.” But I’ve done that over the past few months. If there’s worse to come, now I’d pre­fer to wait and see what the future holds.

4. I’m increasingly uncomfortable with the shadier side of crypto

I am extreme­ly con­scious about the way I spend and invest my mon­ey. I opt for fair trade prod­ucts and pri­or­i­tize social­ly respon­si­ble invest­ments. In cryp­to, I’m a big fan of Car­dano (ADA), which has a mis­sion to use blockchain to make the world a bet­ter place. But there are still too many ele­phants in the room to think that cryp­to is an eth­i­cal investment.

Here are a few:

  • Mon­ey laun­der­ing: Accord­ing to a report into cryp­to crime by Chainal­y­sis, crim­i­nals laun­dered $8.6 bil­lion worth of cryp­tocur­ren­cy in 2021. This only includes mon­ey gen­er­at­ed by cryp­to crimes, not cash from tra­di­tion­al crimes.
  • Ran­somware: Ran­somware attacks — where crim­i­nals lock up a com­put­er sys­tem or data via mal­ware and demand a ran­som to unlock it — grew dra­mat­i­cal­ly in 2020 and 2021.
  • Lack of trans­paren­cy: The idea that cryp­to could be self-reg­u­lat­ing has­n’t proved real­is­tic. Any­one can cre­ate a cryp­tocur­ren­cy token, and there are few rules in place to guar­an­tee that what you read on a web­site is true and accurate.
  • An over­re­liance on sta­ble­coins: Teth­er (USDT) has been fined before for lying about its reserves. It’s the third-biggest cryp­to in the world, and we don’t know whether it has enough mon­ey to sup­port itself or what it’s doing with peo­ple’s mon­ey. For all Teth­er’s assur­ances, I wor­ry that the indus­try is too reliant on a token that could collapse.

It isn’t all bad, though. Chainal­y­sis also showed that illic­it activ­i­ties now make up a small­er per­cent­age of over­all cryp­to activ­i­ty than ever. As cryp­to adop­tion grows, legit­i­mate use cas­es push out the ille­git­i­mate ones. Plus, law enforce­ment is get­ting bet­ter at track­ing cryp­to and seiz­ing funds from ran­somware attacks and oth­er crim­i­nal activ­i­ties. How­ev­er, mon­ey laun­der­ing, fraud, and ran­somware are all issues that cryp­to investors can’t ignore.

Bottom line

Cryp­tocur­ren­cy remains an excit­ing and fas­ci­nat­ing indus­try with huge amounts of poten­tial. How­ev­er, it also car­ries a lot of risk, and sad­ly, crim­i­nals will always find ways to take advan­tage of new tech­nolo­gies. Most of all, cryp­to invest­ing is as much about your per­son­al finan­cial sit­u­a­tion as it is about your belief in par­tic­u­lar projects. For me, it’s time to prac­tice what I preach and focus on oth­er finan­cial goals, at least for a few months.

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