“Bitcoin is certainly more than a fad. The concept of anonymous currency is a very interesting concept — interesting for the privacy protections it gives people, interesting because what it says to the central banking system about controlling that.” – James Gorman, CEO of Morgan Stanley
As this quotation by James Gorman notes, Bitcoin, as with all other cryptocurrencies, are here to stay. The question is no longer whether or not digital currencies will add value to our modern lifestyle; instead, it is a question of how much value they will add. Lets take a look at how cryptocurrencies have performed so far:
For example, at the risk of repeating myself ad nauseam, there are more than 120 Bitcoin-based hedge funds. And the first Bitcoin futures market, The Chicago Bitcoin Futures Exchange, opened in December 2017. Here at Jones Mutual, we believe that both these facts are significant in the longevity and mainstream acceptance of the cryptocurrency industry in the long term. In short, cryptocurrencies are not going to go away.
It would be naive to expect that the digital currency industry’s (as illustrated by Bitcoin) path forwards will be plain sailing. If we look at the Bitcoin price, for example, it is down over 66% from its highest level and has dropped by 58% in the last quarter.
This news is not necessarily all bad news. Bei Hu, in his Bloomberg commentary titled “As Bitcoin Plunged, These Crypto Hedge Funds Kept Making Money”, states that in spite of the sharp drop in the Bitcoin prices, hedge fund managers seem to be able to keep their funds stable and growing.
It is also perhaps worth considering that cryptocurrency performance should be measured against the reason for involvement with one or more of the digital currencies. This idea is best explained by citing a case study.
Let’s assume that you wish to purchase and hold coins of one or more cryptocurrency such as Bitcoin, DASH, Ethereum, and Ripple. Your investment strategy is a long-term one. Therefore, you need to buy low and hold for a long time (more than one year).
Your measure of how digital currencies have performed in 2018 needs to be looked at in terms of the current price versus the purchase price. You cannot pay attention to the daily price swings. Therefore, if you bought your Bitcoin when the price was sitting around $16000 per coin, Bitcoin has not performed well at all in 2018.
On the other hand, if you are a short-term CFD cryptocurrency trader, it does not matter what the underlying asset’s price is. You aim to take advantage of the market volatility and generate a profit using leveraged trading. Consequently, the cryptocurrency market will be doing well in your eyes.
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