The stock market as a whole has taken a beating over the past few months, but cryptocurrency has been hit particularly hard.
The price of Bitcoin (BTC -3.94%) is down roughly 60% since its record high in November. Ethereum (ETH -4.36%) has fallen close to 70% in that time, and Solana (SOL -8.06%) -- one of the breakout stars of 2021 -- has plunged by close to 90%.
Price swings like this can be unnerving for investors, especially when nobody knows for certain what the future looks like for crypto. While cryptocurrency is still a speculative investment (and nobody can say right now whether it will succeed or not), there are a few reasons I'm continuing to invest.
1. Volatility is relatively normal for crypto
Volatility can be tough to stomach, but this type of turbulence isn't unusual for the crypto market. Even major cryptocurrencies have seen severe downturns in the past that make this slump look mild.
Bitcoin, for example, has fallen by more than 80% on multiple occasions in the last decade, and Ethereum lost close to 95% of its value back in 2018. If you had stopped investing in Ethereum in 2018 after its monumental downturn, though, you would have missed out on the 1,630% returns it's seen since then.
Of course, there are no guarantees that the crypto market will rebound from this downturn. But volatility is par for the course with this type of investment, so I'm not overly concerned about this slump.
2. I'm taking a long-term approach
Crypto is still a relatively new technology, and there will be bumps along the way as it finds its footing.
Some experts believe that cryptocurrency is currently where the internet was in the late 1990s and early 2000s. Just like how internet companies faced turbulence in the early stages (culminating in the dot-com bubble burst), crypto will likely see continued volatility as it gains wider adoption.
This isn't to say that crypto will mirror the internet's success, as the two technologies are different in many ways. Cryptocurrency is still speculative right now, and nobody knows whether it will succeed over time. But if it does thrive, it could take years or even decades to reach its full potential.
3. I've chosen my investments carefully
Even if cryptocurrency as a whole succeeds, that doesn't mean that all individual investments will make it. That makes it extra important to do your research, because weaker cryptocurrencies with no real-world utility may struggle to recover from downturns.
Again, because crypto is speculative, there's no way to know which investments will survive over the long run. But the ones with the most utility and the strongest competitive advantages are the most likely to see long-term growth.
Despite buying cryptocurrency, I'm a relatively risk-averse investor. Crypto makes up a very small portion of my overall portfolio, and I'm only investing money I'm comfortable losing. Also, the vast majority of my crypto investments are in Bitcoin and Ethereum, the two largest (and arguably safest) cryptocurrencies out there.
Your investing style may differ from mine, and that's OK. But because crypto is risky, it's important to think carefully about where (and how much) you choose to invest. Cryptocurrency could potentially be a lucrative investment, and by taking a thoughtful and strategic approach, you can lower your risk as much as possible.
