In the notoriously volatile cryptocurrency markets,
it can be easy to get caught up in small price fluctuations. However, advocates of the technology have advice for those who may have had their interest sparked by the combined market's meteoric rise above $100bn this year. Amidst a broader pullback in cryptocurrencies, investors can benefit from focusing on the technology's long-term trajectory, analysts say.
Iqbal Gandham, managing director at eToro, told CoinDesk:
"If you believe that bitcoin is the future of money, and that ethereum is the future of the internet, then you should be investing in the long term."
Gandham is certainly not the only market observer who advocated long-term investing instead of short-term trading. Jacob Eliosoff, a cryptocurrency fund manager, offered similar input. Accurately predicting what the markets will do in the short term is very difficult, he told CoinDesk, and attempts to time the market are "not for most of us". Eliosoff emphasized that while he has been expecting a pullback in certain cryptocurrencies, he is bullish on the asset class in the long-term.
That doesn't mean those involved don't have theories about where the best long bets can be placed. As noted by CoinDesk earlier this week, ether, currently the second-largest cryptocurrency by market capitalization, has been catching up with bitcoin in terms of its total market value. At the time of the report, ether's market cap was more than 80% of bitcoin's, according to data from CoinMarketCap. As such, traders like Whaleclub's Petar Zivkovski suggested those who are new to the markets should do their best to internalize ongoing narratives while attempting to understand the value propositions of any coin. "Ether has also become a true contender over the past few months when it comes to market cap," Zivkovski told CoinDesk. One result of this large market cap is greater liquidity, which has in turn reduced the currency's volatility and made it more appealing relative to many other alternative asset protocols.
Of course, looking long is easier said than done given the nascent nature of cryptocurrencies. For example, bitcoin's ongoing scaling debate appears to be intensifying, heightening trader sensitivity over fears the network could fork. Arthur Hayes, CEO of Hong Kong-based exchange BitMEX, for instance, sees this situation as one that could be "bad news" for the market as a whole. "With the 1st August UASF deadline approaching, I believe we will be range bound. There is a lot of uncertainty amongst traders about the event," he said.
Eliosoff also spoke to bitcoin's scaling challenges, describing the tensions that exist within the bitcoin community as "worse than ever" given that efforts like UASF could lead to a blockchain split. He explained how these difficulties have made other assets – particularly ether – even more attractive. "Given those deep hostilities in bitcoin, if I could only hold one coin right now it would be ether – even at these prices," he remarked. Still, in this light, eToro's Gandham noted that the small dips in the price of assets like ether are perhaps best viewed in context,
"Whilst the recent drop in the price may look like a crash … it’s more accurately viewed as a bump in the road."