Investor Nick Patel explains why the buy-and-hold strategy remains the best solution.
The cryptocurrency market remains volatile, and interest in recent events has gone well beyond the community. However, long-term investor Neil Patel believes this shouldn’t scare off participants, and makes his case.
Governments around the world, and especially in China, are once again trying to weaken the industry. This market collapse probably won’t be the last, but the outlook is gradually becoming clearer and more attractive. The entry of cryptocurrency exchange Coinbase into the stock market has shown – digital assets have become part of a broader environment. Although it does not solve the problem of volatility, it is becoming easier to join the innovation space. Bitcoin is being seriously considered as an alternative to gold, and development teams around the world are working to make the technology more useful and widespread.
The market is at an early stage of development, so the presence of a huge number of speculators who want to get rich quickly is understandable – investors should just be prepared for the ups and downs. In addition to bitcoin, which has the potential to become the world’s first digital currency, etherium is attracting attention. The purpose of the latter is somewhat different – to become a global computing platform. Decentralized applications using smart contracts have a chance to change the usual financial paradigm with its centralized management.
Of course, just like in the stock market, it is impossible to predict precisely the next downturn in the cryptocurrency market. Patel believes the right solution is to continue investing even during negative developments. To prove his point, Nick cites a UBS study of various stock market strategies that have been in use since the 1960s. As it turned out, a simple buy and hold strategy brought investors about 10% a year, while trying to sell at the highs and buy at the lows – only about 2.5%.