Commonality Between Cryptocurrencies & Value Investing Cryptocurrencies

Many traditional stock and forex traders view cryptocurrency as a synonym for gambling. The volatile and speculative nature of cryptocurrencies such as Bitcoin and Ethereum continues to put off investors from playing a hand in these murky waters.

That said, the market capitalisation for cryptocurrencies continues to show a strong and bullish trend. In fact, all crypto assets combine to total over $170 billion in 2017. This amount is up 12 times its full value measured at the end of 2016.

Value investing

This type of trading involves the selection of a particular stock and traded at a discount of their total intrinsic value. However, estimating the actual value of the stock is impossible. Investors try to guess its full value by looking at the company’s portfolio as well as financial reports. A lot of financial panic buying and selling occurs, and as a result, the investors end up making millions in profit.

Understand the product

It is only logical that any investor planning to take a stab at value investing conducts as much research as possible in a bid to understand the company books. The popular saying tied to this type of trading is “buy and sell companies you know”. The same applies to cryptocurrencies.

Most crypto investors end up losing money because they do not conduct as much research as they should. The irregular volatility within the crypto markets doesn’t justify investments done through gambling. Just as in value trading, it is important to monitor the news impacting your portfolio carefully.

Market irrationality

More than 25 per cent of the total value of all cryptocurrency belongs to the top 315 bitcoin addresses. Large sell orders from these portfolios create a general panic within the market, causing an irrational and bearish move. Counter trading during a trend such as this always ends up in losses.

The same also holds true for investment trading. Buying a particular trade during a major bearish or bullish move is not wise. However, there are proven strategies rooted in market reversals and extensions that sometimes yield positive results.