Hodlers will remain
THE drop in bitcoin and other cryptocurrency prices is a good thing, as it will flush out all the punters in it only to make a profit and not care a whit about the technology, blockchain, behind these cryptocurrencies.
The above statement is not about championing or advocating investments in cryptocurrencies, an asset class that is admittedly still tripping on the wild side.
But for legitimate blockchain projects, this is about giving people incentives to invest in technology and push back further the frontiers of what is possible in making payment systems more efficient, or even closing the gap of inequality in various aspects of life.
As in any type of investment, people need to understand what they are investing in. Enthusiasts call this year the year of acceptance for cryptocurrencies, especially of the major ones such as bitcoin, ethereum, litecoin or ripple.
But the volatility in prices betray the shallowness of investors’ understanding of these digital assets and that’s bad. The media is blaming regulators who are pressuring the likes of Facebook, Google and Twitter to ban advertisements for initial coin offerings, a form of crowdfunding for blockchain-based projects.
And the pundits are at it again, saying that the chances of prices rebounding or recovering is slim. However, if any have noticed before, every time the price of bitcoin has fallen, it comes back up, and at levels that are more resilient.
That’s because every time prices fall, the FOMO (fear of missing out) crowd goes into reverse gear, and starts selling because of the fear that prices may go lower after being pushed by them to stratospheric levels, especially late last year.
It fell below US$7,000 early Friday in Asian trade and while prices have recovered a bit, it may go lower. Ultimately, it’s the hodlers, the long-time investors, who understand the blockchain technology, who will hold on to their cryptocurrencies.
They are the ones who will ensure that more education and knowledge on cryptocurrencies and blockchain will spread.
Until then, beware the FOMO crowd and their fads.