It is probably no secret that the recent cryptocurrency boom and subsequent market correction were indeed troublesome to those who depend on their investment portfolios to fulfill their retirement aspirations. Only time will tell if these events leave lasting and cataclysmic scars on the investing ecosystems as a whole.
While investors throughout all financial sectors took losses during the wild run-up in cryptocurrency prices, only some within the financial sector were spared the brunt of these severe price swings. My company, CyberGuard, works hard to help companies remain focused on the most important aspect of their business: providing secure products, services and solutions to help them grow their revenues. In this ongoing process, we’ve been closely watching the SEC’s process for promulgating Rule 144A rules and the recent recommendations made by the Deloitte Firm on best practices.
Taken together, the recent predictions on macro trends are suggesting that we are preparing for a relatively lean year for cryptocurrency investments. Digital currencies have a lot of growth to tap into, but a long-term future focused on token-based ventures is highly unlikely. In fact, the repercussions that cryptocurrencies have on the market could be one of the real drags on the market this year. Nevertheless, many a bright future lies ahead.
Businesses investing in digital assets will certainly have to adapt to changing economic conditions to remain competitive. In 2017 and 2018, we saw capital inflows into private and public markets as companies seeking capital, investors seeking ways to diversify their holdings and traders seeking low-cost opportunities in cryptocurrencies.
This year, market volatility is going to give many businesses pause before building up their digital investment portfolios. We are seeing companies struggle to find sufficient capital to sustain growth efforts as they hedge on currency issues, especially with the volatility and prospect of regulatory changes that will play a significant role in the crypto-currency ecosystem. This will have a less-than-stellar effect on the overall average market capitalization of crypto-currencies in 2019, as well as impacting the top-line and bottom-line of many companies, with the potential to delay or even eliminate new investment initiatives entirely.
Businesses that have diversified their portfolio and invested in many different cryptocurrencies, then, need to be particularly cautious with their investments this year. While their digital assets seem like a safer bet at the moment, it’s critical that they keep an eye on volatility in the various markets, market leaders, and the digital projects that are coming on line. In other words, they must stay vigilant with their investments.
Fortunately, investment into blockchain projects does have its benefits. Some of the top companies in the digital token space are adopting a decentralized and open-source business model. This is a beneficial approach to cryptocurrency development and investments, as a decentralized market creates competition, a free-flow of ideas and innovation, and an environment that will encourage investors to develop new projects.
As the recent bailout of now infamous cryptocurrency exchange Mt. Gox and the SEC’s clearing of the industry points out, investing in cryptocurrencies can present investors with many similar types of risks to normal investments. It is important that businesses are aware of this and assess their current position.
In the current and soon-to-be changing market, businesses should factor in the effects of crypto-currency’s potential detrimental effects on their business, particularly since the crypto-currency environment is still evolving. Businesses with diverse investments will likely do better than those with large sums of funds tied up in crypto-currencies. However, in this environment, there are certain actions that businesses should take to remain protected against the negative effects of the crypto-currency boom and crisis.
Protecting companies and their investment portfolios is an ongoing process, so be on the lookout for how to protect your own investments from the repercussions of cryptocurrency’s volatility this year.