The emerging crypto (web3) industry is more than swapping “magic internet beans” and real innovation is taking place on a scale we haven’t seen since the dawn of the internet. There are great opportunities for investors, creatives, and boundary-pushing visionaries to change the way the world works and interacts with one another. However, with all of those positives comes many negatives as well. We’re at the forefront of a new paradigm shift, and much like the internet’s early days, it was a digital “Wild West”, “dog-eat-dog” world. Scammers, hackers, social engineers, predators… the list goes on. And the more people who get involved, the more potential victims there are.
The cryptocurrency market has always been a rocky road and after the recent market crash, crypto’s validity has once again come into question. Casual investors who don’t even know what they’re purchasing half the time likely lost huge sums of money and many have been scared off. Others may stick around but still don’t really know much or understand the differences and values each of these distinct currencies holds. Meanwhile, anyone on the outside looking in may be skeptical of the market. And there are plenty of criticisms worth addressing. Loads of them in fact. On the other hand, this emerging market presents big opportunities for those who are hungry for something new and for chances to make life-changing financial moves.
But how does the average investor, or even a more seasoned financial investor know where to put their money? Which tokens show the most long-term potential and why? I’m no financial advisor but I’m happy to share my feelings about some of the biggest players in the game and up-and-coming projects I think are worth noting.
Bitcoin
First off, I think it’s always important to mention Bitcoin. While I don’t see Bitcoin as having much potential to see adoption as a typical “currency”, I have no doubt that as a store of value, in the long-term, Bitcoin will continue to go up in value. Being that the market is down right now and considering its recent all-time highs, I think it’s safe to say buying Bitcoin is always a good long-term bet, as greater adoption will continuously increase demand for the finite asset and therefore, increase the price it commands over time. However, Bitcoin is still very expensive for the average investor. Few casual investors can afford even fractions of a single Bitcoin and because of that, it’s often better for investors to look to other blockchains for greater returns and opportunities.
Ethereum
When I discuss other chains, the first one that comes to mind is, of course, Ethereum. For readers who don’t know the difference between Bitcoin and Ethereum, Bitcoin is more of a store of value whereas Ethereum is actually an entire network where other organizations are built. The native coin (or token) call Ether or ETH for short, is the currency used to pay for transactions on the network. Being that Ethereum was the first smart contract blockchain network, it’s seen massive adoption in both the art and finance communities over the past 2 years and the price of ETH has also seen wild fluctuations, with highs at nearly $5,000 and recent drops into 3 digit range.
When it comes to big opportunities, the Ethereum merger is a big reason for celebration and signals a huge shift in the way the entire chain operates, as well as how potentially valuable the native asset might become. Now that the merge has successfully happened, we should see minimal selling pressure from miners moving forward (out of a job post-merge) as well as current node validators until withdrawals are enabled vs under PoW (proof of work) where the vast majority of ETH issuance ends up with selling pressure to pay miners’ costs. For example, upon the merger, ETH issuance dropped considerably, as planned. In fact, post-merge Ethereum has issued 10,310 $ETH at the time of writing this. If we were still under PoW, this would have been 307,390! In other words, current annual issuance is now around 0.12% compared with previous numbers.
Furthermore, and to the excitement of anyone worried about crypto’s environmental impact, the merge means a 99% reduction in energy consumption. This is great for the wider Eco-friendly narrative as ETH can no longer be accused of being highly energy-intensive. Additionally, when the barriers to entry drop significantly, it opens the door for more experimentation and wider adoption, as well as a better public-facing image. So what does this all mean for price? EIP-1559 (Burning ETH with each Tx) combined with the big reduction in issuance gives the potential for ETH to become deflationary at a certain level of block demand. Combine this with the fact that validators cannot claim rewards until withdrawals are enabled (~6 months post-merge), and we can expect these conditions to create a supply squeeze pushing up the price in the long term.
Avalanche & yyAVAX
In my opinion, one of the most promising chains in all of crypto is the Avalanche blockchain. The AVAX token recently reached highs of nearly $150 and lost 90% of its peak value crashing down to nearly $15. This may seem alarming and it is for anyone who bought at the top of the bull run. However, like most investments, buying the top is always a major downer and one that many investors have experienced. But when the market’s down, the strong companies with long-term visions keep their heads down and keep building. Those are the ones to watch and those are the ones who you should be investing in. For example, just because the market is down and the share price of Amazon is down, it certainly doesn’t mean they aren’t still just as active as they were a couple of months ago. Think of how much growth certain companies saw after share price crashes at the start of the pandemic turned around.
This is precisely why the Avalanche chain presents so much opportunity. As a chain already operating on a PoS consensus model, that means all of the benefits we’ll see from the Ethereum merge essentially already exist and have been in action for quite some time on Avalanche. Transaction costs are low, energy consumption is low, node validation is already the defacto method of transaction verification, and new projects are flocking to the chain to build. One of the biggest advancements that also makes Avalanche interesting is Yield Yak’s introduction of the yyAVAX token.
Because most chains require large sums of money to run validator nodes and earn rewards for securing the network, most people are unable to take advantage of this stable earning model. The ability to engage in node validation staking allows investors to play the speculative game while also earning stable rewards in the form of AVAX. so anyone who feels the token is a good investment is paid out in more of the tokens they would have purchased otherwise. But again, this is not available to the average investor. The yyAVAX token makes this possible through a process known as liquid staking, and by holding this token instead of standard AVAX, investors are able to actually earn an 8%+ interest rate on all the funds they hold that might normally sit dormant doing nothing for them. Think money under a mattress. With yyAVAX, investors earn impressive returns and the yyAVAX token also allows them to use it in the greater DeFi market as well, making it even more valuable.
The Takeaway
Ultimately, I can’t stress enough that cryptocurrency is still a very volatile asset and many things can affect the price, and even if you’re in it for the long term, it’s always hard to say where the market will go and when’s the right time to buy. I can say that we’re currently in a bear market and bear markets are always the time to load up on the assets you have the most faith in succeeding, changing, and innovating
the space. However, it’s much better to buy in ETH at $900 and hold rather than $4000 and hold. The asset value will likely go back up and increase in value, but it would be much more advantageous to have 4X the amount should you buy when nobody else wants to.
When it comes to investing in crypto, or any investment for that matter, the rule of thumb is to NEVER INVEST MORE THAN YOU CAN AFFORD TO LOSE. Most people do not make full careers out of crypto despite the news stories you hear so much of when things are going well. And much like a gambling addict will talk about all their wins in the casino and never disclose the losses, many people who lose big hold out on announcing it to the world. This gives a false sense of security to the industry that, all too frequently, leaves casual and professional investors completely rekt.
For the average investor who’s interested in crypto, I can’t give a percentage figure about what someone would have in crypto, as some people may choose to completely avoid the stock market and play the crypto markets or may invest in real estate, precious metals, art, etc. In the end, only invest what you can afford to live without. I’d always advise against taking out loans or spending large fiat reserves, or charging credit cards as those risky moves, while potentially profitable, can lead to devastating losses.
With all this said, crypto is not a “safe” investment unless you know which projects to invest in, and even investing in the best of the best can still set you up for big losses if you hold too long, make careless mistakes, make risky financial moves, a large exploit occurs, or the international economy takes a turn for the worse. It’s also important to note that the market is never going to be in a bull cycle forever and fluctuations & corrections occur all the time. If you invest in blockchains with lots of building going on, there’s a good chance that over time, your investment will increase in value, however, there’s never an assurance that anything will work out the way you hope and unanticipated events should always be taken into consideration.
