Banking giant Wells Fargo said it is still not too late to invest in digital currencies. The main reason remains the growing interest in this area. And the growth in demand is the potential for price growth.
The bank compares virtual currencies to the Internet in 1995.
Investments in cryptocurrency are viable and promising
Wells Fargo's global investment strategy team said that cryptocurrencies are in a phase of rapid adoption. In a February report, the company tried to answer the question of whether investors are too late to invest in crypto assets now.
Wells Fargo expressed confidence that the nascent cryptocurrency market retains its potential as an investment asset class. The bank released a report "Understanding Cryptocurrency" in which it stated:
"We believe that cryptocurrencies are viable investments today, even though they remain in the early stages of their investment evolution."
Last year, when the yield of many coins amounted to thousands of percent, arguments appeared on the market in favor of the fact that it was too late to invest in cryptocurrencies.
However, Wells Fargo doesn't think it's too late to invest in this asset class. Moreover, the market is still at an early stage of its adoption, and now the focus should be on informing investors about the cryptocurrency market.
"We see cryptocurrencies in the 'early, but not too early' investment stage, which is why we have emphasized investor education. The thrust of our view comes from global cryptocurrency adoption rates, which have quickly accelerated from a low base," the report says.
Cryptocurrencies and the dot-com bubble: not everyone will survive
Wells Fargo compared the adoption rate of cryptoassets to the Internet in 1995. Like the World Wide Web in those years, cryptocurrencies are now in a "hyper-acceptance phase." After 1995, the rate of adoption of the Internet did not slow down, and Wells Fargo expects the same from cryptocurrency.
In its report, the bank, along with some other analysts, notes that the cryptocurrency is behaving like a dot-com bubble. At that time, excited investors speculated in a variety of Internet companies, and many of these companies failed.
There are now over 17,000 cryptocurrencies, and some of them are destined to fail. The company urged investors to be patient and avoid investing directly through exchanges, but recommended the "consideration of only professionally managed private placements."
Bitcoin is on its way to becoming mainstream
Over the past two years, the adoption of cryptocurrency has progressed by leaps and bounds. Last year, Bitcoin became recognized as a legal tender in El Salvador. There are other countries that are rumored to be on the cusp of the same adoption.
In an environment of record-high inflation, asset managers are looking to diversify their portfolios. Leading investment banks are already setting up crypto divisions.
Goldman Sachs noted in its 2022 forecast that Bitcoin is poised to compete with gold as a store of value.
According to the firm, the metaverse, another branch of cryptocurrency, represents an $8 trillion opportunity and gives investors the information to seize the moment.
What should private investors do with this, who are trying to understand if the market has a chance to recover from this year's fall? First, understand that the cryptocurrency has a long-term potential. Second, remember that the market can be irrational longer than the trader is solvent.
Against this background, it is worth hoping for the foundation, but not making a mistake yourself, respecting the technical levels, and reasonably evaluating possible scenarios for short-term movement.
