Cryptocurrency means different things to different people. To early adopters, millennials, techies, geeks, and risk-loving investors, cryptocurrency is the future of money.
During bull markets, the incredible performance of cryptocurrencies over traditional assets such as equities, real estate, and gold often makes a solid case for why crypto deserves a place in your portfolio.
However, if you ask traditional crypto influencers crypto influencers , regulators, and governments – you’ll hear the usual diatribe about how crypto is highly-risky, speculative, and unregulated.
Nonetheless, the recent news that China is getting ready to launch a state-backed cryptocurrency has opened the proverbial Pandora’s box. The world will eventually accept that crypto is here to coexist with fiat (maybe displace fiat) over the long term.
The more interesting point is that the consistent outperformance of cryptocurrency over other legacy Wall Street assets is driving growing interest in the cryptocurrency market. For instance, in the year-to-date period, Bitcoin has recorded more than 140% price gains to septuple the performance of the S&P 500 and Dow Jones Industrial Average in the same period as seen in the chart below.
If crypto is this profitable, why isn’t everybody trading cryptocurrencies?
Bitcoin debuted in 2009 as an application of Blockchain technology. Blockchain itself is built on complex maths, cryptography, and computer science. Traditional finance often advises against investing in things you don’t understand; hence, many people who would love to benefit from the huge potential in cryptocurrencies are not quite sure that they understand how blockchain and cryptocurrencies work.
The worst part is that crypto in its current form looks complex with strings of alphanumeric wallet addresses, network confirmation trees, hash rates, and consensus algorithms. The market also lists more than 4000 different coins, altcoins, tokens, and the 2017 ICO boom has left an exponentially larger number of shitcoins, scamcoins, and deadcoins. Hence, it is often difficult to sift through the information overload to find coins that deserve a place in your portfolio.
Another layer of difficulty that makes it hard for retail investors to get started with crypto is the fact that the whole crypto market is less than 10 years old. There are not many tools to screen coins, build trading strategies, or enough data against which you can backtest your strategies.
The highly volatile nature of cryptocurrencies powered by speculative entry and exits, coupled with manipulative moves by market whales, often makes it difficult for many inexperienced traders to survive in the market.