The Crypto Crash of May 2021: Is it the End or a Huge Opportunity?
In April, I decided to move 10% of my investment portfolio into crypto. I was just in time for the May crash. I’m now down about 50% on my investment. But I haven’t sold a coin. Just the opposite, I’ve been buying.
If you actually believe in the transformative promise of crypto, then the current selloff represents an incredible opportunity to get in cheap. After all, one of the basic premises of investing is to buy cheap and sell high. Easier said than done, of course.
I first started investing in crypto back in 2017 when it was still little more than a promise, a potential revolution in how we conduct business and interact with each other. At that time, investing in crypto seemed quite risky to me, so I bought a small amount (mostly ETH) and just left it. When the 2018 crash hit, I was glad to have only invested a small amount.
Fast-forward to 2021, and that initial investment has grown quite a bit, but not enough to really make a difference in my life. I wish I had bought more back then. After seeing the headlines around Bitcoin’s new highs, I decided to give crypto another look. What I found was mind-blowing.
The Promise is Real!
People did not stop working on crypto after the 2018 crash. To the contrary, a lot of super smart folks have been hard at work building the infrastructure for a new way of transacting with our peers. And it’s not just a future promise anymore. The technology actually works!
There are so many exciting projects that I hardly know where to begin. There’s web browsing, NFTs, file sharing, data storage, IoT, gaming, new layer 1 protocols, layer 2 scaling solutions, and much more. But probably the most exciting to me is DeFi.
DeFi is Here!
DeFi stands for decentralized finance. It brings new tools and opportunities for investing, saving, and transacting. It is no exaggeration to say that DeFi represents a revolution in banking. And, here’s the thing, it actually works. It works right now.
With DeFi, it is already possible to earn upwards of 10% interest on stable coins pegged to the US dollar at very low risk. If you walk into your local bank and open a savings account, you are likely to earn about 0.02%. This is not even enough to keep up with inflation, and it’s 500 times less than what you can earn with a stable coin investment.
DeFi will also change how we exchange funds and move currency around the globe. It will create enormous opportunities for wealth generation through staking and decentralized exchanges.
Defi also brings tools formerly used only by professional traders and hedge funds to the masses. Some of these tools are quite powerful and should be used with caution, as they can lead to serious losses (leveraged trading being a prime example).
Some of my personal favorite DeFi projects include: Sushiswap, Pancakeswap, Alpaca, Multiplier (BMxx), and mStable. There are many others. Each of these projects could see exponential growth in the coming years.
Crypto is Not Dead.
Every time there has been a crypto crash, the headlines are filled with various commentators saying “I told you so.” “Crypto is a scam, a Ponzi-scheme, and now it’s finally dead,” they say. And then somewhere between 3 months and 1 year later, crypto hits new all time highs. This time is unlikely to be different.
One can attribute the crash to various things: market manipulation by the “whales,” Elon Musk’s twitter fingers, over-leveraging by inexperienced (or greedy) traders, or simple taking of profits after a sustained bull run. Probably it’s some combination of all of these things. But that doesn’t mean crypto is dead. Far from it, things are just getting started. Of that much, I am sure.
Crypto is new and disruptive. There will be market turbulence. There will be scammers and cheats and market manipulation. These things will settle down with time, but they won’t go away, just as they haven’t gone away in the regular stock market. If you can’t stomach risk, then you should stay away. But you might regret it in a few years.
Worth the Risk?
Clearly, crypto investing is still risky. But I believe the potential rewards are well worth it. As the old maxim goes, no risk no reward. And now seems like a good opportunity to get in cheap.
I am not a financial advisor and nothing in this article should be considered financial advice. This represents my personal opinion provided for entertainment and educational purposes. Crypto investing is very risky. You should always do your own research and only invest what you are prepared to lose.