Continue to Invest in Cryptos During the Crypto Bear Market

The price of bitcoin and cryptocurrencies in general have tanked. Bitcoin prices went from about US$20k and went as low as US$11k but has now move up a little to US$14k currently. To be honest, when it went down, I felt uneasy as earlier in the week I was arguing with some people about how I believe that in the long-run the crypto asset class will grow substantially. However, many crypto bears are claiming that there is no intrinsic value in cryptocurrencies, but I think they are completely wrong. It seems as if people just look at news articles of bitcoin and assume that bitcoin is the only crypto out there. I believe that bitcoin is hampered currently by high fees, but if it manages to solve this problem (e.g. with the lightning network) then I am sure its value will rise dramatically as it provides a world reserve currency. Imagine travelling to some foreign country for a holiday. Rather than bother with exchanging local fiat currency to foreign fiat currency and then carrying paper cash with you that can be stolen, you can just use bitcoin. Of course, you can use credit card as well, but the problem with credit card is that there are very high merchant fees. Most merchants accept credit card because they don’t want to lose customers, but I believe that in the future, bitcoin prices will stabilize to its intrinsic value. From there, if the lightning network is successful, and if there is price stability, there will be a mountain of bitcoin ready to be spent, and merchants will be happy to accept bitcoin versus credit card because credit card has massive fees whereas you can accept bitcoin simply by installing an app on your phone. Even if the lightning network doesn’t work, there are other proposals to scale these networks, e.g. block size increases (in bitcoin cash), sharding (in ethereum), etc.

Bitcoin only addresses the utility of crypto as a global medium of exchange. Then you have ethereum, which is a smart contract platform. There are many businesses that already run on the ethereum blockchain. Then you have ripple, which uses blockchain technology to allow banks to transfer money to each quickly and securely. There are so many useful and potentially disruptive cryptos out there, and there will be many more to come.

In my opinion, it is best to not put your assets in one basket but to diversify across the top cryptos and to dollar cost average into these top cryptos. I also don’t believe you should put too much into cryptos as it is a risky asset class, but when it comes to investing, you must take risk in order to make big returns. As we enter a crypto bear market, I will be keen to dollar cost average into cryptos, probably putting in about $1k per month.

Given the potential of cryptos, I don't think many people appreciate the risk they are taking when they have zero allocation to it. If you put a small amount in, the downside is capped, but the upside is unlimited and is likely to be spectacular. When I look at those who are against crypto most passionately, I believe that they have a psychological bias because they are already obligated to divert their cash flow to other obligations such as a mortgage or family obligations, so they cannot invest in crypto and would rather put it down.