Is Cryptocurrency a Good Investment in 2023?

Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.

The cryptocurrency markets move in cycles, just like stocks. The industry remains in a bearish market, meaning that cryptocurrency prices have declined from their previous heights – most of which were realized during the bull run of 2021.

So that begs the question – Is cryptocurrency a good investment? Read on to discover whether cryptocurrency represents a viable addition to an investment portfolio in 2023. 

Is Cryptocurrency a Good Investment? Our Verdict Summarized

When asking the question – Is cryptocurrency a good investment? investors should consider a range of factors – especially when it comes to the overall risk tolerance. 

Below, we summarize our key findings that beginners should consider when asking themselves should I invest in cryptocurrency?

• Cryptocurrencies are still a new phenomenon, at least when compared to traditional assets like stocks. Although Bitcoin – the original cryptocurrency, was launched in 2009, many digital assets are considerably newer
• Cryptocurrencies are high-growth assets, with the industry consistently outperforming conventional trading markets. Some cryptocurrencies have generated unprecedented returns in recent years that traditional stocks cannot rival. 
• It is important to be aware of the risks before investing in cryptocurrency, especially when it comes to volatility and fraud. This is why investors of all experience levels are advised to do their own research. 
• Rather than asking “Is now a good time to buy cryptocurrency?”, a dollar-cost averaging strategy may be more suitable and risk-averse. This means that instead of going all in on cryptocurrency, investors might consider making small but regular purchases. 
• Another tried and tested strategy to consider is diversification. This means investing in a broad range of cryptocurrencies in addition to traditional assets, like stocks and index funds. 
• Those in the market for the highest returns and prepared to take on additional risk might consider crypto presales. This offers the chance to buy a cryptocurrency before it is officially launched, usually at a huge discount. MEMAG and Fight Out are two such examples – more on this later. 

Ultimately, when asking the question – “Is investing in cryptocurrency a good idea”, investors should ensure they enter the market with their eyes wide open. This not only means being realistic with potential gains, but the enhanced risks involved.

 

Why Crypto is Still a Good Investment in 2023

In this section of our guide, we aim to answer the question – is cryptocurrency a good investment? in great detail. 

Before exploring the risks, let’s start with the many benefits that cryptocurrency represents as an investment product. 

Cryptocurrency is Still an Emerging Investment Product

Cryptocurrency valuations have skyrocketed in recent years. Bitcoin, for example, carried a market capitalization of over $1 trillion in late 2021, after hitting an all-time high of $69,000. This puts the valuation of Bitcoin in the same conversation as Apple, Microsoft, and Amazon. 

However, in the grand scheme of things, many industry analysts argue that even at a market capitalization of $1 trillion, Bitcoin is still undervalued. This is the case across many of the 22,000+ cryptocurrencies that are currently in existence. 

Some market commentators compare Bitcoin in its current form today with the internet in the 1990s. At the time, many were skeptical about the internet and what use it provided to the broader society. But, as we now know, the internet is a necessity. 

This sentiment is similar to cryptocurrency, insofar as many people are still intimidated to enter the market for the first time. In many cases, this is simply due to a lack of understanding of what Bitcoin is and how it works. 

Nonetheless, cryptocurrencies in general are a high-growth market. And like many high-growth markets of the past – whether that’s the internet, social media, or electric cars – getting in early can result in unprecedented gains in the future. 

Huge Discounts on Offer During the Bear Market

We mentioned earlier that the cryptocurrency markets move in cycles. And as of writing, we are still firmly in a bear market. 

While this doesn’t bode well for investors that entered the market at its previous peak in 2021, patience is often rewarded in the long run. 

Crucially, those that are yet to invest in cryptocurrencies have the opportunity to take full advantage of the current bear market, considering that virtually all digital assets are down. 

• For example, while Bitcoin previously peaked at $69,000 in late 2021, as of writing in early 2023, the cryptocurrency has since witnessed lows of $16,000. 
• This translates into a decline of 75%. 
• However, Bitcoin has been through many major declines such as this – and always recovered. 
• As such, by purchasing Bitcoin now, there is essentially a 75% discount on offer for new investors. 

This isn’t just the case with Bitcoin. On the contrary, some of the best altcoins in this marketplace are trading at significant discounts. 

Ultimately, bear markets enable investors to build a diversified portfolio of digital assets at the most favorable entry price possible. 

Diversification is Seamless 

Another benefit to consider when asking “is cryptocurrency a good investment?” is that this industry makes it a seamless process to create a diversified portfolio. 

First and foremost, there are over 22,000 cryptocurrencies listed on CoinMarketCap. While this can make it a challenge to assess the best crypto to buy, at the very least, this enables investors of varying objectives to diversify with ease. 

Second, unlike traditional assets – cryptocurrencies can be fractionated into tiny units. This is because cryptocurrencies are digital and hence, investors can buy a small fraction of their chosen token. In turn, investors only need to consider a small capital outlay of a few dollars should they wish to keep the risk to a minimum. 

Moreover, not only do cryptocurrencies operate in a highly liquid industry, but trading remains open 24 hours per day, 7 days per week. This helps maintain a diversified portfolio, should the investor elect to sell a particular cryptocurrency.  

Presales Offer an Immediate Upside  

Another reason why cryptocurrency interest remains high with investors from across the globe is the establishment of an entirely new market – presales. 

Presales are effectively the cryptocurrency alternative of a stock IPO (Initial Public Offering). Anyone familiar with IPOs will know that they enable investors to buy into a newly listed stock before it hits an exchange – usually at a sizable discount. 

In this regard, presales are no different. For example, Meta Masters Guild (MEMAG) – a brand new project that is launching a portfolio of play-and-earn mobile games, has just launched its presale campaign. 

This offers the MEMAG crypto token at a major discount, with early investors securing the lowest entry price. 

Past Performance  

It goes without saying that many investors will elect to buy cryptocurrency because they want to make returns that traditional markets cannot rival. 

On the one hand, it should be remembered that past performance does nothing to influence the future price of a cryptocurrency. However, by taking into account the historical price action of the broader market, we can see just how lucrative cryptocurrencies have been in recent years. 

• To offer some insight, the world’s second-largest cryptocurrency by market capitalization – Ethereum, was snapped up by investors in 2015 at approximately $0.30. 
• In late 2021, Ethereum was trading at highs of $4,900 – an increase of over 1.4 million percent from 2015. 
• Even during the current bear market, Ethereum is trading at over $1,500 – meaning growth of 440,000 percent from 2015 levels. 

If and when the next bull market arrives, we could see similar instances where cryptocurrency valuations once again go parabolic. 

Potential Risks of Crypto Investing & Things to Consider

Like any investment decision, understanding the potential risk of capital is crucial before proceeding. 

As such, in order to answer the question –  Is cryptocurrency a good investment? we will now consider some of the core risks that must be taken into account. 

• First and foremost, cryptocurrencies are a lot more volatile than the likes of stocks and index funds.
• For example, in November 2022, the total market capitalization of the entire cryptocurrency industry was estimated at just over $1.05 trillion. 
• Just one week later, the same industry was valued at $817 billion, a decline of 17%. 
• Fast forward to January 2023 and the total market capitalization of the cryptocurrency industry has once again surpassed $1 trillion. 

As per the above, this level of volatility might not suit overly risk-averse investors. 

Another risk to consider when attempting to answer the question – Should I invest in cryptocurrency? is relevant to storage. 

Put simply, cryptocurrencies are digital assets and as such, are generally stored in software wallets. If the owner of the wallet forgets their password or worse – witnesses an external hack, the cryptocurrency could be lost forever.  Don’t forget, cryptocurrencies are decentralized, so an occurrence of loss or theft cannot be reversed. 

Moreover, cryptocurrency scams remain present, just like in any other industry. Some cryptocurrencies turn out to be ‘rug pulls’, which means that the sole purpose of the project is to steal investor funds. 

And of course, the most pressing risk is that investors can lose some or even all of their capital when investing in cryptocurrencies. 

Ultimately, investors can reduce their risk in many different ways, for instance, through diversification, personal research, and an understanding of regulation and wallet security. 

Cryptocurrency Prices & Volatility

When electing to invest in cryptocurrency, it is crucial for beginners to understand how money is made and lost. In its most basic form, cryptocurrency prices are based on demand and supply. 

As such, when the overall sentiment on cryptocurrencies is positive, this results in huge waves of buying pressure. Not only from new retail investors but institutional houses too – as we saw in the prior bull market. 

On the flip side, when the bear market arrives, this creates fear and ultimately – results in prolonged selling pressure. Those with a bit of prior experience in the traditional investment space will know that this is no different from how stocks, gold, ETFs, and most other assets operate. 

In other words, cryptocurrencies, like all assets. experience good and bad times. But in the long run, there is an expectation that the trend will continue to move northward. 

The industry standard is to price Bitcoin and other cryptocurrencies…