Cryptocurrency Investors: What Now?

Cryptocurrencies like Bitcoin (CRYPTO:BTC) continue to drop in this market, but does that mean you should avoid them completely?

| More on:
consider the options

Image source: Getty Images

Cryptocurrency continues to fall for investors, and it remains a shock to those who invested in the sector over the last few years. After making some people millions, it seems that those same people may have lost just as much in the recent crash.

So, the question is, what now?

What’s happening now?

Cryptocurrencies like Bitcoin (CRYPTO:BTC) continue to wax and wane, but drops seem to be happening more regularly. Bitcoin, for example, fell by 88% from January to mid-July of this year. And while Bitcoin then rebounded by about 17%, as the market started to climb, a little pullback in the market at large sent it plunging yet again. Now, shares are up only 3% from mid-July to date.

The problem is that the reason for the drop remains unclear, besides ongoing fear of market uncertainty. It’s not like inflation or even rising interest rates really affect Bitcoin or other cryptocurrencies. Instead, it seems that it’s just too risky for investors to get back into in this market filled with slowing stocks.

Still, does that mean you should get out forever? Or use this as an opportunity?

That depends

Of course it does. There are numerous factors when considering cryptocurrencies, but, of course, at the top of your list is your risk tolerance. If you’re retiring soon, it’s unlikely this is best for your portfolio. On the same hand, even if you have decades to invest, it could be a bumpy ride with no certainties if you choose the wrong cryptocurrency.

And yet many investors sought out the “next big thing” when crypto came on the market. Now, one would hope they know better. So, it’s time to move onto companies that have a stronger future in the world full of cryptocurrencies.

Because it will be full of them, we just don’t know which ones. The United States government is working on a digital dollar, and that’s in response to a digital yuan. That’s on top of the privatized companies that continue to create opportunities for investors to sink their teeth into.

So, where should investors look who are able to stomach this highly risky environment?

Think big picture

There are lots of cryptocurrencies out there to consider, and, by far, Bitcoin is probably your best bet. However, it’s incredibly expensive. And that expense doesn’t mean it’s going to be less volatile, it just means it will probably last when other cryptos fail.

Instead, I would look at companies that support the rise of cryptocurrencies. For that, Galaxy Digital Holdings (TSX:GLXY) looks like an excellent option. Galaxy stock is an asset management firm, dedicated to getting cryptocurrency-related companies off the ground. This includes blockchain firms, miners, and cryptocurrencies themselves. In fact, it even mines for crypto itself.

What’s more, Galaxy stock actually looks like a huge value play when you look at its fundamentals. It currently trades at just 5.57 times earnings and 0.28 times book value. And yet shares are down 69% year to date, following the same path as Bitcoin.

Bottom line

Cryptocurrency remains an incredibly volatile place only those willing to take on high risk should consider. And even then, your strategy shouldn’t be “get rich and get out.” Instead, find quality companies that will climb higher and higher in this new digital age.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Bitcoin.

More on Investing

Path to retirement
Dividend Stocks

Retirement Wealth: 2 Top Dividend Stocks for TFSA Investors

Parking a sizable portion of your savings in reliable dividend stocks is a time-tested wealth-building strategy appropriate for a wide…

Read more »

sale discount best price
Tech Stocks

2 Growth Stocks to Buy Every Time They Go on Sale (Like Now)

The right growth stocks are worth buying in almost any market, but they are especially attractive when they come with…

Read more »

Financial technology concept.
Bank Stocks

Canadian Bank Stocks Are Crashing: Should You Buy the Dip?

As bank stocks like Royal Bank of Canada (TSX:RY) are crashing this year, should you go shopping for value plays?

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

CPP Disability Benefits: Are You Eligible?

Fortis Inc (TSX:FTS) stock could provide you with passive income if you can't get CPP disability benefits.

Read more »

data analyze research

Better Buy: BCE Stock vs. Telus Shares?

BCE (TSX:BCE) and Telus (TSX:T) are telecom dividend leaders, but passive-income investors should note the risks.

Read more »

Electric car being charged

Forget Tesla! 2 Canadian Auto Stocks That Could Roll Higher

Magna International (TSX:MG) and another Canadian stock to indirectly play the EV boom.

Read more »

analyze data
Stocks for Beginners

Sun Life Financial: A Good Stock for Most Investors

Sun Life Financial is a quality business that can deliver resilient results. It could be a good long-term investment.

Read more »


TFSA: 2 Top TSX Stocks for Your $6,500 Contribution

Got $6,500 to invest in your TFSA? These two quality TSX stocks could compound large returns for many years ahead.

Read more »