Is cryptocurrency a good investment? I invested thousands and here's why I think it's still wise.
I don’t remember the very first time I heard of Bitcoin or other cryptocurrencies, but I know my earliest impressions of them were negative.
The fact that Bitcoin was being used to grease the wheels of a dark underworld initially made me consider the crypto space morally compromised. Not only did I not understand the complexities of blockchain-based technologies, but the risk involved with investing in a largely unregulated space also scared me.
But I have the good fortune of living part time in Ann Arbor, Michigan, the college town where I was born. So, I often interact with nerdy 20-and 30-something tech workers who were beyond excited about crypto.
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Many of these early adopters got a kick out of explaining the groundbreaking nature of Bitcoin or Ethereum, the network on which many non-fungible tokens, or NFTs, are sold. Many were also invested in numerous other currencies – Solana, Dogecoin, and Cardana, among them – and were eager to extoll the virtues of each.
Some had even made a mint: one buddy, a young astronomer, said he paid for all of his vacations during the pandemic using his Bitcoin profits.
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Over time, all of this enthusiasm began to rub off on me. And the upsides of cryptocurrencies started to become clearer: they are not tied to a central government; they don’t require you to use a bank, and they could someday be used to buy and sell goods anywhere in the world.
Being able to use crypto to buy products is becoming increasingly common. This spring, I bought a bed on Walmart.com using Paypal, which now allows you to trade a small number of cryptocurrencies.
I paid for the bed with Ethereum. As my Ethereum investment was up at the time, I paid primarily with profit. The bed was basically free.
The ease of that purchasing experience validated my decision to invest in crypto, as did the success of do-good, blockchain technology-based companies like Goodr.
It helps that I’ve seen similarly innovative technologies, such as M-Pesa, change economies. The payment tool, which allows people in East Africa to use their cellphones to store and send money, eliminated the need for the average person to get entangled with local, potentially corrupt banks. It has even helped lift people out of poverty.
How I invested in crypto
Still, when I first invested in Bitcoin and Ethereum last year, I started cautiously, buying in increments of $100, $250, and $500 at a time – a pace far slower pace than when I’ve initially invested in money market accounts or the S&P 500 via my 401(k).
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But as my confidence grew, I bought more and more, partly with money I’d inherited. By the middle of last year, I’d invested more than 15% of all the money I had at the time – retirement investment funds included – into crypto and virtually all of it in Bitcoin and Ethereum.
At first, I felt increasingly clever, particularly when my Ethereum more than doubled in value. But when Canadian Prime Minister Justin Trudeau gained the authority to seize crypto assets during a truckers’ strike partially funded by crypto, I got rattled enough that I sold almost all of my Bitcoin.
In the end, I still made out pretty well: earning a profit of just under $1,000.
Crypto crisis: everything crypto crashes
The current market turmoil is putting a crack or two in my rosy impression of crypto, however. Just months ago Goldman Sach predicted Bitcoin would hit $100,000 in the not-too-distant future.
Instead, the crypto market is shrinking feverishly fast: my current Bitcoin and Ethereum investments are now down thousands of dollars and both are performing far worse than most of my stocks (except Netflix: damn you, Netflix!).
I never imagined platforms like Coinbase would discuss bankruptcy outcomes, or that Luna, a lesser-known cryptocurrency tied to its own blockchain technology, would flatline, costing investors a whopping $40 billion.
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Will crypto survive?
The extreme volatility in the cryptocurrency market at the moment would concern anyone.
Not just for selfish reasons, I hope that the biggest, most important cryptocurrencies rebound and get back on the upward trajectory they were on just a few months ago. Otherwise many more people will lose money they probably can’t afford to.
I also share the hope of many others: that the current turmoil represents a right-sizing of the space that will look more like a bump in the road in the long run.
Despite the volatility cryptocurrencies face, their underlying promise feels more real today than even a few years ago and with some institutional investors getting on board, it seems unlikely that the entire ecosystem will collapse, even if a right-sizing was overdue.
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I reached out to Ariel Zetlin-Jones, director of the Blockchain Initiative at Carnegie Mellon University’s Tepper School of Business, for his thoughts on the future of crypto.
The wild ride the current market is on is “very reminiscent of the internet in the late 1990s,” he said. “Lots of individual stocks and companies were over-valued and collapsed, but Amazon and Google are still around.”
But Bill Gates and a host of other big-time investors already disagree with us. If I and so many other newbie investors are totally mistaken, we’ll join a long list of people who bet their hard-earned money on the wrong thing at the wrong time.
Alex P. Kellogg is a public-relations professional and journalist who splits his time between Atlanta and his hometown of Ann Arbor, Michigan.