Regardless of whether these predictions turn out to be
partially right, spot on, or out in left field, what can’t be denied are the
risks involved with cryptocurrency investing.
For starters, cryptocurrencies lack the traditional
fundamental metrics that aid investors in determining an appropriate valuation
for an asset. With a publicly traded stock, we can look at balance sheets,
income statements, earnings reports, and listen to the commentary of management
when determining whether a stock is worth buying or not. Cryptocurrencies have
virtually no metrics that can be examined, save for processing speed and daily
average transactions, neither of which tells us much about the long-term value
of digital currencies.
Just as worrisome is the fact that blockchain technology is stuck
in a vicious Catch-22. The digital, distributed, and decentralized ledger
that underlies most cryptocurrencies has worked splendidly when kept within the
confines of small-scale projects. However, no businesses have been willing to
take the training wheels completely off of blockchain yet, primarily because
it’s untested in the real-world — and gaining this real-world experience is
only possible if big businesses give this technology a chance.
In sum, while cryptocurrencies are still liable to bring a
lot of excitement to the table for the remainder of 2018, I’d suggest keeping
your money safely on the sidelines and out of virtual tokens.
Sean Williams has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool owns shares of and recommends CME Group. The Motley Fool recommends Cboe Global Markets and has no position in any cryptocurrencies mentioned. The Motley Fool has a disclosure policy.