Lately, the massive cryptocurrency crash has been all over the mainstream media. Millions of people own cryptocurrencies and the fall in the value of cryptocurrencies has been steep.
Many crypto investors are still hopeful that their investments will rise in value again in the future. But many others are feeling burned by the crypto crash and are looking for other investment vehicles to make lucrative returns.
There is evidence that the stock market could be a viable alternative to the crypto market. Not only does the stock market have a centuries-old track record of success, but stock options in particular can offer a way to increase profitability in line with the trading results we’ve seen from stock market professionals.
How serious is the cryptocurrency crash?
Imagine a plane with an engine failure and falling uncontrollably through the sky. This is what the price of most cryptocurrencies looked like over the past year.
Bitcoin, the most famous and long-standing cryptocurrency, has fallen over 70% from its all-time high in November last year.
Cryptocurrencies have recently been hit hard by the collapse of the FTX cryptocurrency exchange. FTX was once so big that its founder was one of the ten youngest billionaires in the world. It has now gone bankrupt, drastically destroying the wealth of investors.
The value of cryptocurrencies has plummeted and rapidly, leaving many crypto investors wondering what to do with the money they have left from investing in cryptocurrencies.
Will cryptocurrencies return?
One of the possibilities that crypto investors face is to simply wait and see if the value of the cryptocurrency comes back.
It is impossible to be sure what will happen in the future with the values of the cryptocurrency. One problem in particular is that cryptocurrency is a relatively new investment vehicle.
The cryptocurrency market was formed just over ten years ago. His short history gives no indication as to whether he will be able to recover from an accident of this nature. Although the value of Bitcoin has fallen before, some economists see this crash as fundamentally different from anything that came before it.
This means that there may be an additional level of risk associated with maintaining an investment in cryptocurrencies.
Cryptocurrency prices have shown signs of a market bubble in recent years. In some ways, it was like the Dutch tulip bulb market bubble that started back in the mid-1600s when speculation pushed the price of tulips to the extreme.
In this case, some tulip bulbs were sold for six times the annual salary of the average person. In retrospect, it seems shocking that someone would pay such a sum to buy a single tulip. At that time, however, market speculation determined the price, and the value of tulips came to depend more on emotion and speculation than on the tulips themselves.
Cryptocurrency can be something similar. It has no physical product or organizing body. Considering we’ve gotten to the point where our hairdressers and moms were talking about cryptocurrencies, the demand for cryptocurrencies has reached a climax, perhaps similar to the tulip bulb craze.
Now that the bubble has burst, does this mean that the cryptocurrency will be forever crushed and never regain its value? No, it doesn’t necessarily mean that. But it is clear that there are some indications that the cryptocurrency needs more fundamental value to support the prices we saw when the cryptocurrency peaked in value at the end of last year.
One thing that crypto really does have is a track record of volatility over the decade of its existence. As such, future price spikes are certainly not out of the question, but whether the cryptocurrency market can sustain any potential price hike in the future remains debatable.
Ultimately, it is simply impossible to be sure what the future holds for cryptocurrencies. There are many signs that crypto investments come with many risks, but crypto will still return to glory in the future.
You might want to consider the stock market if you want to avoid the risk of the crypto market but still want to make a profit on your investment.
The stock market could be a viable alternative
One thing that the stock market has is a long history of growth in its value.
In the United States, the stock market was created many centuries ago. And if you look back over the past 90 years, the stock market has grown at an average rate of 9.8% per year.
This is a stark contrast to the cryptocurrency market, which seems to be relatively young.
This is not the same as saying that there are no down periods in the stock market. Of course, there have been many stock market crashes.
What makes the stock market different is that it has a long history of recovering from these crashes. He has recovered from every accident he has ever gone through.
There is a magnet that pulls the stock market up over time. There are periods of crisis from time to time, but historically the imaginary magnet has always taken over and pulled prices up again.
A similar long-term trend may offer higher chances of making money in the stock market compared to the cryptocurrency market.
Many studies show that a “buy low, sell high” investment strategy can be a particularly effective way to make money in the stock market. Because the stock market has such a deep history, it is well suited for using historical price research to guide future investment decisions.
And right now, the stock market is almost 20% below its all-time high, which could make market-based ETFs a good buy-low-sell-high candidate. It is impossible to be sure whether it will go further down or up, but in the past the market has always found a way to come back up eventually.
Let’s say your main goal is to make sure that the value of your account will grow over time, and an irreversible collapse is unlikely to occur. In this case, the stock market can be a worthy alternative for investment.
Can the stock market offer increased returns?
For many who have invested in cryptocurrencies, the attraction has been the potential for explosive returns. For such people, the historical average annual return of 9.8% achieved by the stock market may seem unattractive.
One way to increase the potential for greater returns is to invest in stock options, which are a mechanism that allows you to control a stock at a price that is much lower than the actual price of the stock itself.
So, for example, if you buy a $100 share that goes up $5, you earn 5%. But if you buy an option on that stock and it only costs you $10, when the price of the stock rises by the same $5, it will be a 50 percent gain. This gives an idea of the potential amount of profitability the options can offer.
It is important to note that as the potential profitability increases, there is a proportionally increased risk. If the same stock falls more than $10, that decline could negate the value of the option.
Options also have an expiration date, which means that a price change must occur before the expiration date in order to benefit from an upward movement in the share price. This represents another element of risk associated with stock options.
So there is more potential risk with options than with stocks, but this can make options more like cryptocurrencies in terms of their volatility and potential explosive returns.
We know of one option picking service called Mindful Trader with a long track record of successful option trades over the last month.
Over the past 30 days, his real-time trading book shows that his options trades have generated a 15-2 win-loss record. His options account increased in value by 32.7% during this period.
For those crypto investors who remember the explosive profits of the past, these earnings from Mindful Trader may remind them of the glory days. They demonstrate that options can have enough potential benefits to satisfy the cravings of aggressive crypto investors.
But it is important to note that the Mindful Trader trading book shows that not all periods are the same, and some periods are unprofitable. This highlights the risk associated with option trading.
But for risk-averse crypto investors, stock options offer one of the best alternatives to cryptocurrencies for potentially explosive returns.
Over the past year, the crash has become a problem for most crypto investors.
Those who are considering investment options should study the stock market. It has a markedly longer track record of profitable earnings and offers mechanisms such as stock options to increase those earnings.
No matter where you have money, investing comes with some risk. The higher you turn the scale of potential reward, the higher the level of risk that usually accompanies an investment.
This article originally appeared on Wealth of Geeks.
