Glory, gloom & doom! Are cryptocurrencies losing asset class status?

Synopsis

To invest or not to invest in cryptos depends on the investment horizon, Atanuu Agarrwal, Co-founder, upside AI. They should be not more than low single digits in your asset allocation, and it should be money you are willing to lose.In the last eight months, crypto investors across the globe have lost more than $2 trillion of their wealth as the total market capitalisation of the crypto assets breached $1 trillion levels earlier this week from its peak.

New Delhi: Doomsayers’ prophecy about the crypto market is coming true as the digital token market is in a tight bear grip.

The winter in the digital asset class is likely to last longer than expected, as signaled by a number of crypto companies, who are laying off their staff and human resources amid the crash and dire cash crunch.

Manit Ankhad – Vice President and Head of Crypto Research, 1Finance said, “In the past nine years of crypto being in existence, we have seen two bear markets in 2015 and 2018.”
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Each time, it has bounced back harder and seen extraordinary returns being earned by investors who continued investing during these times, he added. “The issues causing this sell-off are broad economic factors and not asset class-specific.”

Other market experts, with a more critical outlook, said that cryptos are not short-term money making machines. Perhaps, they would have a binary outcome – either they will be very valuable or will be written off in future, they argue.

To invest or not to invest in cryptos depends on the investment horizon, Atanuu Agarrwal, Co-founder, upside AI. They should be not more than low single digits in your asset allocation, and it should be money you are willing to lose.

In the last eight months, crypto investors across the globe have lost more than $2 trillion of their wealth as the total market capitalisation of the crypto assets breached $1 trillion levels earlier this week from its peak.

Behemoth crypto tokens including Bitcoin, Ethereum and BNB are down by 70 per cent from their peaks. Altcoins including Solana, Avalanche, Dogecoin, Shiba Inu and Polkadot have plunged more than 90 per cent from their highs.

Market experts said that get-rich-quick investors would have learnt their lesson and smart ones only invest in fundamentally sound tokens and stay away from junk. Invest in tranches to take advantage of the volatility.

People who were over-leveraged must have learnt their lessons but people who have diversified their money and sensibly allocated to this asset class would not be so affected, said Ankhad from 1 Finance.

Adding more to it, the lesson learnt is always the same at the end of a bull cycle, said Agarrwal from Upside AI. “Don’t invest just on FOMO. Have a clear and concrete thesis before investing.”

Despite being backed by worlds richest man Elon Musk and Michael Saylor, crypto has ample disparagers who vocally denounce cryptos for shamming as an asset class. This includes Warren Buffett, Bill Gates, Charlie Munger and Jim Rogers to name a few.

Seasoned investor and Lead Sponsor at First Water Capital Fund Ricky Kirpalani said that it is very unfortunate that crypto exists as an asset class. He said that neither there is any intrinsic value in cryptos, nor they can produce anything.

He said that crypto is energy intensive and failed to be a hedge against inflation. “In fact, it’s more in-sync with the once-frothy sectors” he added. Even the stablecoins have failed to provide stability.

“There are a lot more arguments for and against space and I always reserve the right to be wrong, but I believe that it is simply a case of that age-old story of fear and greed much like Tulip Mania,” Kirpalani added.

Ankhad from 1 Finance said that veterans who are critical of cryptos have a certain style of investing and are hands on it too. “There is an understanding gap when it comes to crypto,” he added. “People will start to understand the concepts soon.”
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Updated: 06/16/2022 — 14:00