When the first digital assets were just appearing on the market, most economists and financiers emphasized that these were, in fact, economic bubbles and it was not worth investing in them. However, the main economic law is as follows: price depends on demand. The demand for digital assets is only increasing over the years. As long as this trend continues, cryptocurrencies can be considered a smart investment. Moreover, the constant crises and turbulences of recent years have made traditional areas of investment (real estate, company shares, etc.) not as reliable as before. Instead, more reliable digital assets have appeared, which are tied to traditional physical assets.
That is, it is possible to invest in digital assets. You can make a lot of money from them, but for this you should approach the matter wisely: assess the market situation and constantly follow trends, diversify assets, listen to the forecasts of investment specialists.
Diversification of cryptocurrency assets: choose several areas for investment
If you have already decided to invest in digital assets, then do not invest all of your funds in one thing. Analyze the market, choose several interesting directions and distribute funds between them. This will protect you from unnecessary risks, because while one asset may lose in value, the other will grow.
Diversification involves the distribution of the investor’s funds across different sectors. For example, if you decide to make money on fluctuations in the value of securities, you can choose shares from various industries: technology, health care, agriculture and energy.
As for cryptocurrencies, they are a single asset class, but they can also be diversified. Previously, exchange players invested mainly in Bitcoin, as other projects did not have significant value. In 2023, the situation has changed: the industry is saturated with various tokens, each of which is supported by its own blockchain and has significant potential for growth. Investing in their development, investors actually get a stake in startups.
For example, invest 30 – 50% of the amount you plan to invest in the main cryptocurrency, 10 – 20% – in non-fungible tokens (NFT), invest the rest in altcoins and stablecoins (they are considered reliable because they are tied to traditional assets – precious metal, currency of some country, etc.). The ratio and types of assets may vary, depending on the market situation and your preferences.
What is the market situation now and what affects it
Monthly fluctuations in the exchange rate of cryptocurrencies in the range of 5-15% increase or decrease of the exchange rate is quite a standard phenomenon for the market. Given this practice, 2023 was a fairly stable year for the digital asset market.
As for 2024, it traditionally began with a jump in prices. So, in February, prices soared by 40%, and in March they added another 16.3%. However, April was characterized by subsidence (-11.3%) – investors withdrew capital. In May, the value of digital assets began to move upwards again. Market capitalization increased by 8.6%
The increase in the inflow of investments was facilitated by the change in the US legislation on the regulation of crypto circulation. Notably, the House of Representatives passed the Financial Innovation and Technology 21st Century Act (FIT21), and the US Securities and Exchange Commission (SEC) pre-approved ETH spot ETFs.
The Solana (SOL) coin price rose the most last month. In May, its rate increased by 33.9%, and the total blocked value of the currency (DeFi TVL) increased by 33.4% to 4.84 billion USD.
ETH (+26.8%) and TON (24.2%) also entered the top three in terms of price appreciation. It is worth noting that the total value of the last asset again breaks records. During the month, the capitalization of TON increased by 227.8%. 326 million dollars have already been invested in the currency.
On the other hand, the NFT market fell significantly last month (-41%).
Forecasts of the development of the market of digital assets
Given the seasonality factor, the second half of the year is rarely marked by sharp fluctuations in the digital asset market. So, if there are no significant upheavals or high-profile announcements, to which the cryptocurrency market usually reacts quite actively, then in June there will be a slight decline in investor activity, and rapid rises should not be expected until October.
With that in mind, August and September are good months to enter the market, as digital assets typically drop in price around this time. Having invested in some currency in the third quarter of the year, you have a high chance of earning by withdrawing funds in January-February. However, everything depends on the chosen currency and other factors.
For example, the statement of celebrities or famous businessmen about the purchase of an asset almost always causes its value to increase. Also, the introduction of legislation regarding digital assets in various countries actually legitimizes them and adds value to them. For example, during meetings with voters, Donald Trump announced his intention to liberalize legislation on the regulation of the cryptocurrency market. If he becomes president, the probability of a rise in the value of assets will increase significantly, and if he fulfills his promise to change the legislation – even more so.
Therefore, if you decide to invest in crypto, you will have to regularly monitor the market situation.
Risks for investors
Despite the intensive development of exchanges, one should not forget about the risks of such investment. Often, countries change legislation in a direction unfavorable to digital assets – they excessively regulate or prohibit their use. This is due to the fact that crypto is often settled during illegal operations – drug trade, money laundering, because due to the weak regulation of the market, it can be difficult to track the movement of funds.
There is also a risk of your saves being stolen. For example, last month, Japanese hackers took out a digital exchange DMM Bitcoin assets in the amount of 305 million dollars. The leakage of funds from the wallets of exchange customers was detected quite quickly – in a few seconds. All users have been notified of temporary technical work, and DMM Bitcoin representatives have assured that all customers who lost their assets due to the malicious attack will be reimbursed.
In such cases, diversification also saves, so invest rationally and never invest everything in one asset.
