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Crypto Carves a Path

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Crypto

It wasn’t supposed to be this way. Thirteen years ago, Bitcoin was introduced. According to its most ardent believers, it would replace the world’s financial system. Today, Bitcoin makes up just 0.2% of international remittances, according to a US-based think tank.

Perhaps nowhere is the decline in crypto more evident than in El Salvador. You’ll remember El Salvador made Bitcoin legal tender last year. Bitcoin usage has since imploded, with only 20% of companies in El Salvador accepting it and less than 5% of sales being conducted in Bitcoin.

It’s safe to say that, at least so far, Bitcoin and its siblings have failed as a medium of exchange. That’s not to say it doesn’t serve any purpose at all, but we can’t say the dollar is about to disappear, either.

How about crypto as an asset class? Here, we have something more substantial. Like gold, crypto isn’t the most ideal medium of exchange for most daily transactions, but it is very effective as a store of value. It has relatively inexpensive transaction fees to purchase, is open 24 hours per day, and has a proven track record of effective success.

In fact, the barrier to entry into the investment world of crypto is now low enough that almost anybody can participate. This can be a feature, or a bug, depending on what stage of the investment cycle you invest in. Alternative asset classes often require that you be an accredited investor before participating in the investment scheme. An accredited investor is an investor with a special status under financial regulation laws. Exactly what it takes to become an accredited investor varies between countries, but most require a certain level of net worth or annual income to qualify.

Accredited investor status has no doubt saved many unsophisticated investors from investment schemes that would have otherwise separated them from their money. The regulation is there to protect the vulnerable in society. But, it has also kept some of the most profitable opportunities out of the hands of young, capable investors who don’t yet have the means to qualify, but otherwise are in a position to lose their investment and still remain financially intact.

Here at Wanderer, we’ve made the case that crypto is here to stay, even if its role in the world changes with time. Often, disruptive technology was started to serve one purpose, but has morphed into other, more useful purposes. Bitcoin may have began with one set of goals in mind, but with time, morphed into what it is today, which is a vehicle for speculation and for conducting certain types of transactions. That is a far cry from what it started as, but that didn't stop the market from repricing the cryptocurrency much higher over time.

We bring this up because right now, most cryptocurrencies are at major support levels, that if broken, would suggest much lower prices ahead. Anyone interested in buying the dip on crypto should keep in mind that crypto is new. Nobody really knows what it is worth yet. Today, it could be cheap, or it could be expensive compared to what its average price over the next five years will be. There just isn't enough price history yet to use to determine when a bargain is being offered. In the meantime, it pays to honor support levels.

When purchasing crypto as a trade, predetermine what your stop will be based on the chart. Then, stick with your stops. Eventually, crypto will find its footing again, but for now, testing different price levels with carefully placed trades is about all we can do.

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I've been trading and traveling my entire adult life. I'm currently trading from my boat in the Caribbean. Over the years this has gotten easier and easier to do. Drop the anchor, tether your phone to your laptop, browse some charts, and trade. At Wanderer we first began investing in Bitcoin in 2017 when it was worth $2,500. Fortunately, we recognized its potential, unfortunately, we didn't realize it even earlier. Today it is worth about $30,000, and we believe it is here to stay, though its price is surely going to continue to fluctuate dramatically. Bitcoin will have its ups and downs along the way, but years from now we expect it will be higher. Either way we'll still be bopping around in the islands.

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