The Investment Case for Cryptos

Here, it might be helpful to consider the reasons many investors give for considering an investment in gold:

  1. A History of Holding Its Value
  2. Weakness of the U.S. Dollar
  3. Inflation
  4. Deflation
  5. Geopolitical Uncertainty
  6. Supply Constraints
  7. Increasing Demand
  8. Portfolio Diversification

The truth is that all of these arguments except the first one (a history of holding its value) can be applied to cryptos. And, depending on the time frame being considered, crypto can be a store of value. They have experienced a number of bull and bear markets in their brief history, like any other asset.

But, in some cases, cryptos have withstood the test of time. There have been a number of economic catastrophes around the world in the past decade and cryptos did allow some to store wealth even as their country’s currency collapsed.

Crypto assets are also mobile and could be transferred quickly. In this way, they are like gold bars but perhaps more practical given the weight of gold. It isn’t hard to envision the arguments in favor of an allocation to crypto in a portfolio as a disaster hedge.

It is not difficult to envision a scenario where cryptos become more useful as advances in computing power make them easier to use and lower transaction costs.

While they are unlikely to replace credit cards or debit cards in the foreseeable future, an investment in cryptos could be like an investment in credit card processors when the industry was beginning.

Demand for cryptos could increase simply as cryptos survive. They have survived a bubble and by some measures the bubble has been completely retraced. To many analysts, when prices return to the beginning level of the bubble, that’s considered a buy signal.

But, bubbles take time to resolve and the markets rarely recover quickly. Now could be the time to start investing in crypto with a long term plan to accumulate the assets in a diversified portfolio. A small investment every month, similar to dollar cost averaging in mutual funds, could reward investors in the long run.  Dollar Cost Averaging has been proven as a successful investment method.  Just invest the same amount each month into a diversified portfolio and you should see some good results in the long term.

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