Can Value Investing Be Found in Digital Currency?

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Can Value Investing Be Found in Digital Currency?

Value investing occurs when an investor purchases an asset at a discounted price against its exact value. Undervalued companies list their shares for trade on various stock exchanges worldwide. Stock exchanges facilitate the buying and selling of shares. Investors in this kind of venture believe that the market overreacts to social, political, and economic changes. Naturally, the movement in stock prices is not an indicator of the company’s principles or performance. However, the investor gets an opportunity to profit by buying in at a deflated price.

Value investing and cryptocurrency

A 2021 Gemini report reveals that approximately 14% of adults in the US are crypto owners, and 63% are curious about digital currency. People are increasingly putting their trust in cryptocurrency as names such as Bitcoin become commonplace in the financial arena. Like stock exchanges, digital currencies are used in transactions and sometimes experience price fluctuations.

Digital currency qualifies for value investing because it is bought and sold on different platforms and has transferable wealth qualities. With this in mind, it helps to consider that a digital currency such as Bitcoin was created as a remedy for the US financial crisis. Therefore, it is expected to withstand or even flourish during economic downturns. Cryptocurrency is an intriguing investment, and it can be profitable, though it attracts potential risk.

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An investor needs to be well-versed with the details of crypto trading and available tools. Unlike stocks, digital currencies do not need to operate under the supervision of a management team, and they do not have to exercise any financial discipline. Technological advancement does not affect digital currencies.

Benefits

Digital currencies are meant to create trustworthy currency separate from the traditional financial structures. They are structured to eliminate some of the failures of standard currencies. Digital currencies highlight:

An Element of diversity: and eliminate the traditional national borders to provide investors with a seamless experience across the globe. In September 2021, CEO of Coinbase, Brian Armstrong, voiced his sentiments on US Securities and Exchange Commission, who recently cracked down on his firm to level the crypto-related. However, such activity does not directly affect other crypto-currencies, say like Bitcoin.

Non-third-party interference: Investors retain their anonymity and transfer wealth with minimal requirements. Token holders are unburdened by the numerous requirements needed for transactions with the traditional bricks and mortar financial institutions. Digital currencies are secure, safe, and easy to store as transferable wealth.

Independence: These digital tokens are independent of any sovereign nation; they exist as lone entities.

Disadvantages

Lack of understanding: Sources indicate that in 2022, approximately 57m people will invest in cryptocurrency, yet only 14% of US citizens own crypto. Again, The Ascent reports that many more are not investing because they do not understand the mechanics of blockchain, among other crypto tools.

Not regulated: Because cryptocurrency is not regulated, it isn’t recognized globally and attracts potential risk. However, digital currencies also enhance a borderless experience as they eliminate geographical inconveniences. Even though digital currencies lack standardization, cryptocurrency has international backing from people of good financial standing.

In June 2021, MicroStrategy, a business analytics firm, made another bold move, spending approximately $489million on cryptocurrency. MicroStrategy bought 13,005 bitcoins, each averaging at $37,617. The firm capitalized and took advantage of the price crash despite warnings of loss given Bitcoin’s downward spiral. Another wealthy backer of digital currencies is the real estate tycoon Kent Swig. He established DIGau after learning from his son the benefits of cryptocurrency.

Reports claim that Swig has put up $6 billion in gold to back up the new cryptocurrency. He also explained in an interview with Bloomberg his intention for this kind of backing. Kent Swig’s DIGau, the US-based cryptocurrency, will pay dividends to the token holders. These significant investments encourage more people to take risks in investing in cryptocurrency.

Overall, the Covid-19 pandemic continues to impact our daily lives and the economy at large. Many people find it difficult to make financial decisions during this testing time. Nonetheless, on investment matters, the tried and tested methods in investing during economic downturns are in cash or high-quality stock. However, digital currencies like Bitcoin have gained recognition as an asset in the past decade. When millionaires back these financial endeavors, they present investors with the option of venturing into other investment projects.

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