The lure of gaining great wealth by investing in cryptocurrency it has attracted investors from around the world in recent years, but the collapse of much of that value in recent months provides a sobering lesson in market volatility.
Local experts say this volatility should convince anyone considering a critical need for crypto before entering the market: do your own research.
learn before you win
Gordon Gulledge, Greenville’s in-house cryptocurrency specialist Foster Victor Wealth Advisors, says he got involved with crypto about nine years ago, in part due to growing curiosity from his customers. He quickly learned that there are some fundamentals to this emerging market that any investor should always keep in mind.
The blockchain technology on which cryptocurrency is based has enormous long-term potential for a variety of applications, says Gulledge. But cryptocurrencies themselves are highly speculative and therefore tend to be inherently volatile as an investment.
What happened to the value of Bitcoin, the first and still the most widely traded cryptocurrency, is illustrative, says Gulledge. It has lost around 60% of its value from a high of $69,000 per Bitcoin in November 2021 to a low of around $25,000 in early May 2022.
“You have a lot of control, whether it’s with traditional markets or with this market,” says Gulledge. “‘Do your own research’ sounds so cliche… but once you’re in that market, it can go to zero pretty quickly.”
He also says that much of the hype around crypto is fueled by social media and that for every individual who reports making a lot of money from crypto, there are probably “10 or 20 people” who have lost a lot of money.
Gulledge says that reports of people earning millions or billions of dollars in crypto can trigger a get-rich-quick mentality which is never a good reason to jump into such a volatile market.
Dylan Flasky, a cryptocurrency and NFT (non-fungible token) consultant in Greenville, describes that drive as FOMO: the fear of missing out. He has been active in crypto for years and says that if he hears a lot about a crypto investment opportunity on social media, it is probably too late.
“There are always winners and losers in everything,” he says. “That’s why it’s important to be educated… You have to be very well informed about what’s going on in the market.”
don’t be in a hurry
A corollary to doing your own research, says Gulledge, is not to rush.
“There’s no need to rush,” he says. “Take your time [and] learn what you’re getting into. This market is going to be cyclical like everything else.”
Gulledge and Flasky say that the fear of missing out is often what leads crypto investors to make poor decisions. Fear of missing out on a golden opportunity can lead people to rush ahead before they have learned enough to understand the risks.
“A lot of people don’t want to spend time learning,” says Flasky.
Instead of following that impulse to jump, he says people should watch the market every day to understand its cycles before investing money. A good resource is base of coinsone of the most popular online markets for cryptocurrencies, providing a wealth of information on market trends.
Flasky says that another resource, perhaps surprisingly, is YouTube. he quotes Crypto BitBoy as a channel that offers a regular and comprehensive overview of trends within the crypto market.
Gulledge says that another good rule of thumb is to consult someone you already trust to start learning about the market. With so many unscrupulous people involved in crypto, developing reliable sources of information is key.
“You need to understand that [the market’s] it’s going to be volatile and you need to understand what your game plan is, before you put money in, not after,” says Gulledge.
Key terms to know
Cryptocurrency: These are digital assets created with encrypted blockchain technology. Bitcoin it was the first widely used digital currency. Ethereal it is the second most popular cryptocurrency.
block chain: a type of encrypted database distributed on a worldwide network of computer servers. This distributed ledger system is difficult to hack as transactions are recorded on all servers on the blockchain.
Crypto wallet: A crypto or digital wallet uses blockchain technology to give its user a unique digital identity. This digital signature then becomes part of the blockchain and identifies ownership.
Digital asset: This is a type of investment linked to blockchain technology, ranging from one of the more than 20,000 cryptocurrencies to the large number of non-fungible tokens.
“Pump your own bags”: Term used in the world of cryptocurrencies to refer to the practice of the owners of a digital asset promoting the value of that asset to attract buyers and increase the value.
FOMO: Fear of missing out is the urge among certain investors to jump into the market for digital assets like cryptocurrencies before fully understanding the risks.