8 Things To Consider Before Investing in Crypto in 2024, According to Financial Experts
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Cryptocurrency has been on quite a wild ride since it launched back in 2009. Today, it is quite a controversial topic among investing experts. This is largely because it’s volatile and only loosely regulated.
Though vexed and always under heated debate, the crypto market is still a formidable and popular investment sector. For example, by the end of 2021, it was estimated that close to 300 million people worldwide owned some type of cryptocurrency, according to crypto.com, as reported by Forbes.
You may be wondering what the year may hold for this booming but contentious space. Let’s hear what financial experts think — and what you should take into consideration before investing, or building out investments, in crypto in 2024.
Project Legitimacy and Security
Not all cryptocurrencies are the same, and some crypto projects are, well, sketchier than others. This is why it’s imperative to do your homework on each crypto project you’re thinking about making a move in. Ensure it’s legitimate and secure.
“Look for a clear roadmap, a competent team and a transparent business model,” said Dmitry Mishunin, CEO of HashEx.
You should also ensure the project has undergone a thorough security audit by a reputable firm.
“This is crucial for smart contract-based projects to prevent vulnerabilities and hacks,” Mishunin said.
Valuation Challenges
Part of what makes crypto difficult to understand — for newcomers, in particular — is that it doesn’t align with traditional valuation models.
“Prices are less driven by fundamentals and more by narratives, such as Bitcoin being perceived as digital gold,” said Daniel Krupka, head of research at Coin Bureau.
Be wary of storytelling that veers wildly in favor of crypto. Focus on what your research renders instead.
Information Quality
Another thing to consider when approaching crypto is that quality information is hard to come by. This, Krupka said, is due to biases and technical complexities.
“Successful investment often hinges on thorough, independent research and understanding the narratives driving crypto projects,” Krupka said.
Bull Markets vs. Bear Markets
You should also know how bull markets work in crypto, and how bear markets work — they’re not necessarily like the traditional stock market.
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“Bull markets in crypto often see gradual rallies with sharp corrections, while bear markets usually have gradual declines with sharp spikes,” Krupka said. “This behavior significantly impacts investment strategies.”
Potential Developments Around Bitcoin ETFs
When considering investing in cryptocurrency in 2024, it’s critical to stay in the know about potential developments around Bitcoin ETFs.
“The United States Securities and Exchange Commission (SEC) is expected to make decisions on several spot Bitcoin ETF applications by January 2024,” said Liam Hunt, director and analyst at Sophisticated Investor. “This decision is highly anticipated as it could significantly influence future regulations and investment trends in the cryptocurrency space.”
But what exactly is a Bitcoin ETF?
“A Bitcoin ETF offers investors a way to invest in Bitcoin without the complexities of direct ownership, like managing crypto wallets or navigating crypto exchanges,” Hunt said. “They are designed to track the performance of Bitcoin, providing a more straightforward and regulated approach to investing in this cryptocurrency.”
The perhaps good news for those thinking about investing in crypto is that the potential approval of Bitcoin ETFs could broaden the investor base for Bitcoin, “possibly leading to increased adoption and price stability,” Hunt said.
Even With a Bitcoin ETF, There Is Risk
Though a Bitcoin ETF could make the world of crypto a bit cleaner and clearer to navigate, such a development wouldn’t eliminate the inherent risk cryptocurrency carries.
“Investing in Bitcoin ETFs also carries risks such as counterparty risk, liquidity risk and market volatility,” Hunt said. “The crypto market is known for its high volatility, and the price of Bitcoin can greatly swing upwards or downwards in a short time. Additionally, the regulatory landscape for cryptocurrencies in the U.S. is still evolving, which means some regulatory risk remains even if Bitcoin ETFs are approved.”
Crypto Could Become More Accessible (If There Is a Bitcoin ETF)
Another thing to consider is that, if approved, a Bitcoin ETF would make the cryptocurrency more accessible to more people, which could increase the adoption of Bitcoin in general.
“This anticipated decision by the SEC will be critical for the cryptocurrency market as it might pave the way for increased mainstream acceptance and growth in Bitcoin’s adoption,” Hunt said.
Community and Support
Another thing to consider when approaching crypto is what the project’s community and support looks like.
“A strong, active community and responsive support are indicators of a project’s health and potential longevity,” Mishunin said.
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