What are some elements to consider when investing In an asset group such as cryptocurrency?
Cryptocurrency itself is not, for the moment, an intrinsic store of value. By intrinsic we mean to be able to measure the value of the asset itself. For instance, the value of a company can be measured by its generated cash flow, hence have an intrinsic value attached to it. Bitcoin for example is different in the sense that it is measured by the market price, meaning supply and demand forces dictated by the market without a tangible appliance to it such as for example gold.
Another element to consider in order to have a holistic overview of the asset group is to benchmark the total size of the cryptocurrency market vs. other commodities that crypto is often being compared to as an alternative store of wealth. The total market cap of crypto at the time of writing is very close to 2T USD. While if we take Gold (without the jewelry part of the business) it is valued at circa. 5T USD. Some food for thought to determine the potential and possible limits of the cryptocurrency market for the near future.
Our short point that we are conveing in this trading academy article is that when deciding to invest in assets it is advisable to sometimes zoom out and have a broad perspective and analysis of the different asset groups and how do they compare to each other both fundamentally and technically.
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E-Club Trading team