Investing in cryptocurrencies: are they profitable now?
Last year 2021 was a record year for cryptocurrencies and many of them, including bitcoin and ether, hit new market highs. Total crypto market capitalisation in 2021 reached $3 trillion with record numbers of transactions in every major region including the Americas, EMEA and APAC.
Meanwhile we present Cryptex cryptocurrency exchange. It has a wide range of useful tools as well as a user-friendly interface. Cryptex is completely anonymous and gives its users the opportunity to invest in cryptocurrency without a long registration and confirmation of their identity. You can buy cryptocurrency at a bargain price any moment at the link
The current year of 2022 has set a number of broad directions for the crypto sector from the outset. At the helm are the challenges of a fragmented regulatory framework, in the context of which authorities in different parts of the world are exploring different approaches to date. Equally acute are industry-related issues of climate and technological innovation, and more recently, global security issues, including industrial and financial security, have been on the agenda.
With that in mind, let’s take a closer look at the outlook for cryptocurrency investors this year and beyond.
Cryptocurrencies as a defensive asset
In recent years, crypto proponents have emphasised the importance of blockchain technology to combat monetary inflation associated with fiat currency. Responding to threats of global shocks, especially the COVID-19 pandemic and geopolitical events in EMEA, money supply growth increases at the rate of inflationary expectations and the transmission mechanisms of individual countries’ monetary policies, leading to price inflation.
Gold is a classic example of inflation protection. Although its value as a hedge is also hotly debated. Gold and other natural resources have a physical scarcity that depends on how much of it can be mined per unit of time. Cryptocurrency issuance is freer in this regard. And so its presentation as “digital gold” is not supported by all investors and researchers, but in light of recent trends, some positive correlation may be strengthened going forward.
The views of individual researchers and operational strategists diverge, with some seeing cryptocurrencies like bitcoin and ether as short-term protective properties and some seeing prospects for this asset class converging with gold. And while some categorically deny the similarity in return and volatility characteristics between gold and individual cryptocurrency classes, their potential for hedging against inflation is generally confirmed.
The results of separate studies on bitcoin’s ability to hedge against inflation indicators and under the extended Fisher hypothesis (EFH), in the context of separating observed inflation into expected and unexpected inflation, also show that bitcoin has partial ability to hedge against expected inflation in specific countries (mostly among OECD countries).
From a global perspective, the crypto industry has already repeatedly demonstrated advantages over traditional economies and finance in a number of issues on security, hedging and financial risk diversification, as well as in selected energy and environmental initiatives. But the labour front for regulators, developers, communities and investors remains unfathomable, and establishing workable infrastructure and regulatory financial, tax and credit standards for individual countries and regulators could take several more years.
Today we have been able to confirm the ability of cryptocurrencies to hedge the risks of fiat inflation, but the question remains: how long can this ability be sustained? To answer the question of whether cryptocurrencies are profitable – yes, absolutely. But are they profitable now? Will they be profitable by the end of 2022? We should probably recommend separate studies that clarify the outlook for specific coins.
