Long term cryptocurrency investors have a problem. They believe, despite a severe crypto winter, that crypto is here to stay, will be a viable long term store of value, and belongs in their investment and/or retirement portfolio. Their problem is that not all crypto investments have been secure. Leaders in the crypto realm like Voyager, FTX, and Genesis, have collapsed, been charged with fraud, and are going through bankruptcy. What is the safest cryptocurrency for those who intend to stay engaged and invested in crypto going forward?
Safety of Cryptocurrency Investments and Intrinsic Value
In regard to investment safety, there are two issues for which there is little difference, no matter if you are investing in cryptocurrencies, real estate, stocks, or precious metals like gold. The first is the market value of the investment at the current time and also going forward. Is the investment in cryptocurrency, gold bullion, farmland, or Microsoft stock worth its current market value based on expectations going into the future? In the world of stocks, long term investors use intrinsic value as a guide. What will be the return on investment for this stock, property, precious metal, or cryptocurrency over the years? The market price of the investment is determined by its forward-looking earnings. Of late the most reliable predictor of Bitcoin has been the Nasdaq!
Safety of Cryptocurrency Investments and Investment Viability
Here at Profitable Investing Tips we routinely caution investors to be wary of scams, hyped investments, and any investment which the person does not fully understand. Something that has bothered us for years has been the rapid growth of crypto coupled with insufficient transparency of the sort that investors need to make competent decisions.
There is no question that fortunes have been made (and lost) during the rise of Bitcoin and others from pennies per token to the late-2021 Bitcoin high of $67,000. However, the wild price swings in crypto from 2017 to 2021 had little grounding in the sorts of factors like the economy or earning power that one typically uses for investing in stocks.
As crypto winter has decimated crypto token values and weeded out unprofitable businesses, one thing has been made clear. The business model of way too many crypto businesses was based on belief in their own hype that crypto would keep going up forever.
Crypto businesses like FTX that found themselves losing money resorted to lending money from one branch of their business to another branch, making it seem like they had more assets than they really had. This sort of practice is fraudulent and is the sort of thing that regulation, like what banks and stocks are subject to, typically spots along the way to making an investment niche safe from illegal practices like Bitcoin wash trading.
So, how do you find the safest cryptocurrency that you can as you look to the future?
For cryptocurrencies safety there is short term protection from market risk and insolvency of a given token. That sort of protection lies in stablecoins but only in stablecoins that are tied directly in value to the dollar, euro, or yen and with sufficient hard currency reserves. Algorithmic stablecoins are “protected” by computer algorithms that seek to modify trading of the token in order to protect its value. That kind of “safety” has proven to be false in crypto winter. Two crypto tokens that are backed by dollar reserves and are denominated “at parity to” the dollar are TrueUSD (TUSD) and Tether (USDT).
Cryptocurrency Growth Potential
Successful long term investors find investments with long term growth potential. It is our considered opinion that long term growth in crypto lies in practical uses of the blockchain, crypto tokens, non-fungible tokens, decentralized finance, and the Metaverse. The best and safest crypto investment we currency see for the future is Ethereum and the Ether token. We believe that the era of wild crypto swings in value will be extinguished as regulation takes hold. The profit in the crypto realm will be in practical uses. This brings to mind the old saying from the California gold rush days, “When everyone is looking for gold, it’s a good time to be in the pick and shovel business.”
What Is the Safest Cryptocurrency? – SlideShare Version