Our discussion covered how crypto has changed, the volatility of 2020, and what the future of crypto means for investors
On December 18th, we chatted with Michell Moos who is the Managing Editor at Crypto Briefing, a crypto-focused publication dedicated to the crypto industry and advocating for the future of finance.
1. Crypto is far more accessible today than it used to be; mining used to be the easiest way in
In the early, early days of cryptocurrency, mining was the easiest way to gain exposure to assets. Exchange infrastructure to provide customers with trustworthy and reliable platforms didn’t exist, so the easiest way to get involved was to set up a few computers and run a node.
Though it has been around for over a decade, the complexity of bitcoin and crypto mining has kept it relatively misunderstood. The challenges of mining and high barriers to entry (the price of electricity and computing hardware requirements), have diminished the opportunity for hobbyist miners to a niche community. Mining today is predominantly corporate driven and B2B with large mining pools. But according to Moos, the concerns around mining centralization are overblown for ETH and BTC, though may be valid for other assets.
2. 2020 saw a shift in ideological conviction
The March drop was a critical point in the year for crypto, inducing fear and a significant sell-off by investors who did not hold an ideological conviction in bitcoin. Moos says the experience of watching bitcoin fall rapidly also spooked him because of the temporary concern it raised for the impact on businesses in the crypto industry.
Fortunately, the downward trend supported a rebound later in the spring, and continued into the summer when bitcoin reached the $10k level and kept increasing. It was in July and August when the industry experienced a turning point, seeing more consistent news come out about institutional investors putting capital into the crypto market. It was these groups that understood the value of bitcoin’s economic model and highlighted the use of the asset as a hedge against potential deflation of the US dollar.
3. There is something fundamentally different about DeFi
The crypto industry has witnessed many trends over the past few years, but DeFi, the latest focus for many investors, isn’t just a trend, it’s a game changer. DeFi provides fundamental utility that aligns with crypto ethos. DeFi gained traction as protocols and decentralized applications (dApps) found a clear product market fit; DeFi products provided real use cases to users who sought a decentralized solution to financial services. Despite limitations, the network effects have been paramount to the success of various DeFi protocols. Ultimately, the network effect has proven to be far more important to the success of DeFi protocols than the size of the problem being addressed.
But DeFi is still very complex and not designed to serve all investors. OKCoin has made it easy to access high yield DeFi protocols by providing a centralized fiat on-ramp to decentralized services. OKCoin’s Earn is a tool for earning high interest on deposited stablecoins, charging no fees and providing access to up to 20% APY.*
4. Learning is easier with skin in the game
Moos says it’s a lot easier to understand how crypto works when you have skin in the game, and we agree. Putting a dedicated amount of capital into crypto assets acts as a motivator to understand how bitcoin and other cryptocurrencies function. But Moos warns that it’s not worth trying to time the market because even top analysts get their short-term predictions wrong. Instead, have conviction in the long-term, based on the fundamental and technical reasons you think bitcoin or another asset will succeed.
5. Dollar-cost averaging allows you to build your position over time
Like with all crypto assets, the price of bitcoin is volatile and investors should only put money into the market that they are willing to lose. But this volatility can be used to an investor’s advantage with dollar-cost averaging.
Dollar-cost averaging into your position is a great way to profit from a long term trend that is volatile, by investing a small amount at a time. If the price goes down, you can increase your total investment and automatically lower your average cost. If the price moves continuously upward, it would result in lower gains compared to going all-in from the start, but gives you exposure to an increasing price trend. This is an easier way to ensure you get exposure to price increases as they happen, rather than waiting to enter the market and missing out. Check out Recurring Buy to set up dollar-cost averaging for your portfolio.
Watch the full interview with OKCoin’s Elaine Song and Mitchell Moos:
*APY rates are variable and subject to hourly change.
