The debate over cryptocurrency investment has been a subject of prior interest primarily due to the high volatility seen in the virtual trading space. The voluminous growth in peer-to-peer exchange and blockchain technology has created a stir, helping cryptocurrencies emerge as a significant component of the financial markets. The market, which was almost non-existent a decade ago, is the new talk of the town. Everyone is keen to know about its eccentricities and the benefits it has to offer. Many young investors are especially interested in making serious investments in this field of the financial market. However, the volatility experienced by the crypto market is relatively high, yet the yields it promises to show are luring many professionals to make their investments.
According to analysts, there has been a drastic evolution in crypto trading. In over a decade and it is slowly pacing its way to the mainstream trades. Today, more than 10,000 cryptocurrencies are trading publicly. As the popularity of the crypto market increases, analysts believe cryptocurrencies like bitcoin, the future of financial markets, are grabbing opportunities to buy them before the value goes further up.
Crypto works by removing the central banks from managing the money, favouring the supporters as the value of money is usually reduced by the banks over the years via inflation. Moreover, blockchain technology is a decentralized processing and recording system and ensures an increased security system than traditional payment systems, which has been a significant selling point of Crypto from the beginning; hence no compromises are made on this front.
Trading with assets that are as volatile as cryptocurrencies do, however, require patience and strategic thinking. But once we can understand this vast universe of trading, the crypto market could be very beneficial. Given the still new and emerging status of cryptocurrencies, it is relevant to understand the relationship between cryptocurrency and the standard financial asset classes persisting. The empirical analysis shows a mild association between the returns of Crypto and general commodities, especially precious metals that do not translate to the volatility spillover effect.
According to Michael Novogratz, CEO and Co-founder of Galaxy Digital Holdings, who is an enthusiast in investing and trading in Crypto, asset management and venture financing, the very fact that a very crucial mass of genuine and reliable traders and institutions are now getting involved in investing in Crypto has undoubtedly spurred its position as an investment class. It does seem that despite the price volatility, the interest in bitcoin is nowhere near diminishing for these institutions as per the current macroeconomics and political backdrop. And thus, it seems safe to say that Crypto is to remain in the adoption process.
Cryptocurrency and its strong brand identity largely agrees with its widespread social acceptance and, given its many other qualities being security, privacy, transferability, and its digital platform makes a plausible case for it being the future of investment. Zach Pandi, GS Co-Head of Global FX, Rates and EM strategy, firmly believes that investment institutions should treat Crypto as a macro asset parallel with gold.
However, apart from the debatable nature of Cryptocurrency, many professional investors and analysts firmly believe that the entire model of Crypto is a promising prospect, given the immense multitude of potential uses for crypto assets.
Novogratz sees an enormous scope for development in the three sectors of the crypto ecosystem – Decentralized finance, NFTs (Non-fungible tokens), and payments.
There are specific issues, such as market fragmentation, that need to be addressed before a complete institutional acceptance of crypto assets. However, crypto assets are considered as a highly potential asset for the digital era. Analysts have further found that only one percent of the total cryptocurrency activity is outlawed and should be dealt with accordingly and fluctuations in the crypto market are as turbulent as any other investment out in the open market. Other than that, crypto investment shows high opportunities for the future, as it is one of the most significant technological inventions of the Information Age.