Is Bitcoin a long-term investment?

Is Bitcoin a long-term investment?

The world of cryptocurrencies is changing fast. Once again. Yesterday's novelty collapses, namely non-fungible tokens (digital art and collectibles registered on the blockchain), nft. A deadweight loss of 97% compared to the all-time high reached in January of this year. According to data from Dune Analytics, NFTs jumped from $ 17 billion at the beginning of 2022 to just $ 466 million in September of this year. But it is not only non-fungible tokens that "evaporate", as traders say: there is a larger collapse in the cryptocurrency sector, estimated at around two trillion dollars, caused by the rapid tightening of monetary policy which strongly reduces flows of speculative asset investment.

The cryptocurrency industry, and the underlying blockchain technologies, is extremely complex. The apparent collapse is also interpreted as a redefinition of values ​​which does not affect the fundamentals and which instead prepares for a "rebound", that is, a new phase of growth. According to some, in fact, cryptocurrencies are not only made to stay, but must be viewed from the perspective of long-term investment.

At least this is the opinion among others of Ferdinando Ametrano, a physics graduate , co-founder and CEO of Checksig, a company that acts as custodian of bitcoins and other crypto-assets tailored for institutional investors and wealthy individuals. Checksig is a startup co-founded by the former Intesa Sanpaolo executive: after the first seed round last December of 1.5 million euros, which brought a valuation of 20 million, now the company has opened a new capital increase to be able to grow on international markets by looking at venture capital and private equity.

Why bitcoin and other cryptocurrencies are collapsing again After partially recovering, bitcoin has fallen below $ 20,000 again. The Fed's announcements on interest rates and the general uncertainty on the markets are weighing

New forms of investment

The basic question remains, however: cryptocurrencies, a new investment "asset class", who is it for? Meanwhile, the trend in values ​​suggests a scenario trend. According to CoinMarketCap, in fact, the market capitalization of cryptocurrencies from 2017 to today has grown by more than 50 times, despite the slide in recent months, with Bitcoin and Ethereum taking the lion's share, covering 57% of the market cap.

In Italy, according to the data collected by Ametrano, the market has reached a value of about 23 billion. Checksig is part of the small group of companies that obviously believe in the growth of this market opportunity, that is to provide tools for those who want to invest in cryptocurrencies, and if anything complains about the current regulatory vacuum: "Despite the attempts at marginalization by regulators, the The market is growing. But there are no regulations. The crypto world is a great far west. There are no maps or sheriffs. But it glitters. Beware of who you board with when you invest: information is needed. However, the change is objectively epochal " , says the CEO

Investors, companies but also simply the curious in our country are not lacking: more or less large events are held throughout Italy, such as the Milan Fintech Summit in progress these days with more than 70 speakers and 780 minutes of interventions between keynotes and panels. The thesis of the crypto-optimists is that, since the invention of the blockchain, everything has changed in the world of finance.

Cryptocurrencies not so much as a payment instrument (even if they can be used in this way) but above all as a bearer investment instrument, even usable with innovative formulas, transforming them, for example, into collateral for investments (and therefore freezing them to make them collateral seizable in the event of default). The reasoning of the cyber-optimists is that, if banks accept grit forms or vintage Rolexes as collateral to provide a loan, it is unclear why they should not accept Bitcoin under certain conditions.

The complexity of this market, however, is not only technical and regulatory but also linked to its dynamics: cryptocurrency is not an investment for everyone. We need caution and a real understanding of the phenomenon and its technology. Understanding the investment thesis behind this asset class is the key to making your investment. It takes expertise, training, a balanced portfolio and advice to help define an understandable and acceptable risk profile for the investor.

The Ethereum revolution that everyone is waiting for The blockchain project is about to change the system with which it certifies cryptocurrency operations towards one that reduces energy consumption by 99%. If successful, it could symbolize a turning point for the blockchain world

Risks and volatility

The first risk is financial, given the extreme volatility of the market. But technological and cybersecurity expertise is also necessary, attention to regulations and to the counterparty with whom the investment is made: those who want to invest but do not have the technical skills risk giving their money to scammers or companies simply unable to manage the investment. and maybe get robbed. Finally, there is the problem of compliance with the rules: how to declare your investment in Bitcoin?

According to Ametrano, the three needs (buying, keeping and being in compliance with the law), for example, are needs fundamentals of the market that companies like yours are trying to satisfy. But there is one aspect that is of fundamental importance. And that is: what is the ideal cryptocurrency investor? With the entry of institutional investors in this market, the dynamics changed (according to some analyzes, the collapses in value of the last few months would have been generated by the purchase logic and realized in the short-medium term of the large funds) but the profile of the private sector that invests in cryptocurrencies continues to play a central role.

One of the elements that most shapes this profile is the duration of the investment: like a mortgage. With the ups and downs of the market, you need to invest for the long term and have a lot of patience. Hence, the crypto world is an investment for an investor who can endure the freezing of a portion of his savings for up to twenty years. This predicts that he is a young investor but already in possession of a substantial wealth, given that the phase of very low value bitcoins has now been over for several years, and that he may have a life expectancy such as to be able to enjoy the investment at a ' reasonable age.

At what age is it worth investing? If you have to give a number at the "right" age to consider a major investment in cryptocurrencies in light of these variables and by reading the dozens and dozens of forums where the topic is debated, this number exists and is 33 years old. According to Neel Acharym, for example, “Investing in cryptocurrencies at a young age can yield higher returns than those who invest later in life. This is because cryptocurrencies have greater growth potential than other investments such as stocks and bonds, which tend to stabilize after a few years ". Instead, after the age of 33, the age to enjoy the fruit of the investment, assuming that it exists and actually goes to maturity and not to zero, begins to be excessive.

Although, especially among early investors, part of the community of those who have followed the Bitcoin phenomenon from the beginning, the preferred strategy is that of "hodl", a typo for the term "to hold ", which indicates the strategy of" holding on to coins for life ", as Jake Frankenfield also reports.

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