As an asset class, cryptocurrencies have been viewed with skepticism by many investors. Seasoned investors are well aware that money quickly earned is money quickly lost. Young investors are interested in making money quickly, and have no strategy in place for money maintenance, which is possibly more important. While cryptocurrencies as an asset class have been avoided by investors such as Warren Buffet, the sector has attracted everyday individuals, some firms, and large numbers of traders.
However, even long-term investors are changing their tune. Cryptocurrencies are no longer a fad, but are an everyday feature of the modern era, with huge potential. The regulatory and legal challenges that are commonly cited as barriers to entry are being removed with innovative ICOs and alternative investment strategies that remove these hurdles.
Jeong Ki-wook, formerly of Cisco and founder of the South Korean wealth management firm, TrustVerse, says that Ethereum and Bitcoin can evolve into safe haven assets. There is always an adoption period when the price is going to be volatile, but as adoption increases, the prices of cryptocurrencies such as Bitcoin and Ethereum will stabilize. Bitcoin has by far the most trade volume, while Ethereum is essentially the exclusive cryptocurrency for ICO investment. These two cryptocurrencies will arguably form the backbone of the cryptocurrency infrastructure. They are the first point of entry into the cryptocurrency market.
“Safe Haven” is an interesting term relative to cryptocurrency. Gold is a safe haven because when everything else crashes, it retains its value. It is reliable. Bitcoin is similar in many ways, as it is a safe haven when calamity hits the market. As the dollar and stock market go down, the price of BTC tends to go up, though it is not an exact or linear relationship. It needs to maintain a stable value to be called safe. Otherwise, it is just a hedge against market collapse. Gold is the benchmark for a store of value, as it tends to retain its price and rises when fiat currencies fall. Bitcoin is similar regarding rising value when the dollar falls, but the price is not stable. While it is currently not possible to run a business on a cryptocurrency that can rise 30% in a single month, this type of volatility will certainly decrease with time.
Presently, cryptocurrencies are still a high-risk, high-return asset and will be for the foreseeable future. However, as Jeong Ki-wook points out, as regulation increases along with adoption by businesses, customers, governments, and payment processors, then the volatility and risk can only go down. He further states that AI would have considerable benefits in assisting investors regarding what portfolio of cryptocurrencies to invest in. However, AI is a long way off, and in the meantime adoption and awareness needs to increase, and the price of cryptocurrencies has to stabilize. Until this happens, cryptocurrency cannot be called a safe haven.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.