The word 'cryptocurrency' is a synonym for 'gambling' in the minds of many traditional stock market investors. It's definitely true that assets like Bitcoin and Ethereum are of a very speculative and volatile nature.
However, the steadily increasing market capitalization of cryptocurrency shows that the general trend is upwards. At the moment, the total market cap of all crypto assets combined sits at around $170 bln. That’s a twelve-fold increase from last year.
Value investing is a strategy where stocks are selected that trade at a discount to their intrinsic value. The actual value of a share is obviously impossible to estimate. Investors try to make an accurate guess by analyzing a company's financial reports. Very often, value investors manage to profit after an asset has been battered by panic selling or other irrational situations.
Cryptocurrencies don't have balance sheets or an income statement, and their value can’t be properly evaluated. Nonetheless, some of the core principles of value investing can still be applied to this asset group.
Understand what you invest in
Rule number one in value investing is only to get involved in investments one understands. This also applies to cryptocurrencies. In the long-run, misinformed crypto investors will end up losing money. Random betting is simply not a viable investment strategy.
Successful cryptocurrency investors are well-informed, closely monitor news that could impact their portfolio and are always looking for new opportunities'
Regulation is Welcome But Not Yet
Bitcoin Foundation’s Claasen believes it is simply too early to start regulating bitcoin in a manner that is restrictive to the development of this technology.
He told The Independent that “state and federal legislation creates hurdles for innovation, well in advance of knowing what the impact of the technology is going to be – or what it enables.”
While the majority of the bitcoin community agrees that there should be some level of bitcoin regulation to provide clear guidelines that bitcoin and blockchain startups can follow as they develop innovative new solutions, a “tough on bitcoin” regulatory framework would undoubtedly hinder progress. Startups would then have to focus on spending their time and resources on complying with new laws and regulations as opposed to delivering on their mission statements.
Furthermore, as the technology itself is still evolving, it would be better for financial innovation overall to continue to let it evolve by using more of a “laissez-faire approach” than crippling its development early on and, therefore, potentially falling behind other nations when it comes to financial technology innovation.
Whether the Bitcoin Foundation will succeed in its efforts of lobbying for more bitcoin-friendly regulation remains to be seen, but it is a good start to challenge lawmakers before bitcoin-negative proposed legislation is passed.
