The biggest challenges facing investors in the crypto space
The world of crypto has brought about a new bubble, that so many people have benefited from financially. There have been ups and downs across the industry, but numerous people have remained resilient when faced with catastrophic bear markets.
Especially in recent times, with the collapse of the LUNA token, the de-pegging of UST, the war in Ukraine, and the stock market sell-offs. It has been a turbulent year for the crypto markets.
In light of recent events, could this be the early signs of the crypto bubble popping, or is it the next stage of crypto-asset prices ready to soar to all-time highs? Regardless, there are many challenges that await investors, and here, we discuss what those challenges are.
Trust and transparency
Before investing in the crypto markets, or any markets for that matter, there must be a connection of trust between the project and the investor. When you look at founders publicly taunting investors online (as Do Kwon (founder of Terra Luna) did) then you begin to feel a sense of distrust within the project.
It is important for a crypto project to maintain a strong sense of integrity among investors, especially from the founder’s side. For too long, there has been a stigma attached to crypto projects that show founders creating pump and dump schemes.
This has been a worrying challenge among investors, as, it’s difficult to gauge the authenticity of a crypto founder’s intentions. By which, as an investor, you must dig much deeper into the project as a whole.
This leads to the second point, and that is transparency. Many projects in the industry have hidden behind a facade, and this raises red flags among the investing community, or at least it should.
Before investing in stocks and shares, a public company’s information is well documented with the SEC, allowing investors to get a better understanding of what they’re investing into.
In contrast, the crypto world is not as straightforward, forcing investors to run their own analysis of the project, and make a judgment based on what they uncover.
As a crypto project, they must be willing, and open, to share similar information, as you would find with a publicly-traded company so that investors can make a more informed decision. Without this information, then it is entirely down to the investor to take the risk.
An insecure market
Today, the crypto market is not stable, and in many ways, it won’t stabilize, at least not for a few years. Due to the volatility of the crypto market, it has become a dis-trusted industry for investors to hold on to for the long run.
There is still money to be made in the crypto world, but the most minor issue that arises will set off a downturn in stocks, easily wiping billions of dollars off the market overnight.
This has been proven time and time again, as, corporations, hedge funds, VCs, etc… often have cryptocurrencies in their portfolio, among other assets. Still, when there’s turmoil in any aspect of the trading world, these crypto-assets become high risk and are often the first asset that is sold off.
This triggers a domino effect bearish market, as these institutes cannot hold on to the faith that crypto markets will see stability in times of crisis. This becomes a challenge among crypto-focused investors, as, their crypto portfolio will inevitably be hit during these times.
In many cases, the crypto market has been deemed a high-risk market, and this won’t change any time soon. Ultimately it is down to the investors themselves as to whether they can overcome these challenges, and be convinced to invest money into the market.
