Federal Reserve plans to aggressively hike interest rates this year in an effort to curb the surge in inflation hit equities, with the S&P 500 down 18% this year. High-growth tech stocks were squeezed as investors turned to more conservative and away from riskier investments.
Unsurprisingly, the cryptocurrency market, the riskiest asset class out there, has been hit. After reaching a market peak of nearly $ 3.000 trillion in November last year, the entire industry is now worth less than $ 900 billion. And many cryptocurrency-focused companies are in trouble and even bankruptcy.
It is certainly a time of fear for investors as their portfolios collapse. However, staying calm and a long-term mindset is the best thing to do.
Zoom in and focus on the big picture
While this is easier said than done, when it seems like everyone is panicking and selling around you, it should be a top priority to stay calm and not abandon your investment strategy. To increase the chances of this happening, you need to be in control of your financial situation. This means paying off any high-interest debt and having a sizeable emergency fund on hand. This position guarantees the ability to stay on course and not sell the holdings in the portfolio at the worst moment.
As for the cryptocurrencies that investors should focus on, I believe the right approach is to keep things as simple as possible. The two most valuable and oldest cryptocurrencies were also not spared during the recent market crash. Bitcoin, which fell 54% this year, still produced a five-year return of around 670%. And Ethereum, which fell 68% in 2022, has generated a monstrous return of 37.700% since its launch in 2015. Both cryptocurrencies have the potential to continue to be big winners over time, despite the excruciating volatility.
Another way to invest in the cryptocurrency industry is to buy traditional companies
Coinbase, the leading US brokerage and exchange operator, presents itself as an effective way to bet on the growth of the entire sector. While it has made nearly all of its money from trading fees so far, Coinbase plans to take cryptocurrency into the next stage of adoption: utility in the real world.
Even the main fintech operators, such as Block and PayPal (PayPal shares - PYPL ticket), offer exposure to cryptocurrencies, albeit in a more indirect way. Investors who don't want to step out of the way might consider these payment assets for their portfolios.
Of course, anything can happen in the next month, quarter, or even year. Markets are unpredictable, especially in the short term. That's why it's so important to have a long-term mindset, looking ahead a decade or more. This perspective doesn't just hold true for the stock market, it is even more important when it comes to the world of cryptocurrencies.
Digital assets and the underlying blockchain technology have the potential to revolutionize the way humans interact with and transfer valuables. Furthermore, cryptocurrencies can fundamentally change the way we view the concept of money. These kinds of things turn the tables, but if things work out, cryptocurrencies could significantly increase in value in the future.
The current downturn in the market should be regarded as normal. Indeed, for those able to do so, this may be the right time to invest more while everyone else panics.