- A major fundamental shortcoming for Crypto is the absence of fundamentals and intrinsic value. One of the biggest drawbacks would be its inability to generate any form of cashflow which makes it impossible to derive an intrinsic value.
- As an asset class, Crypto’s lack of an intrinsic value gives rise to negative implications such as i) being vulnerable to bubbles, ii) lack of reliable ways to gauge downside risks, and iii) incompatibilities in a long-term investment portfolio.
- We also expect Crypto to remain challenged by wild swings in volatility, potential implosion of leveraged bets, and fading momentum. A possible early tapering risk (by the Fed) remains a key near-term headwind.
- We liken investing in Crypto to the Greater Fool investment strategy and recommend avoiding this asset class. We further caution against averaging down and dip-buying given the absence of fundamental support.
Chart 1: Most widely-traded coins have suffered significant sell-off since hitting YTD highs
Crypto’s inherent flaw – there’s no intrinsic value
Major implications and reasons to avoid ‘investing’ in Crypto
Chart 2: Bitcoin's value plummeted after mid-April, breaking key psychological levels
Chart 3: Volatility of Ethereum and Bitcoin far surpassed major assets
Other pitfalls
Our Stance: Avoid this 'Greater Fool Investment Strategy' Asset Class
The Research Team is part of iFAST Financial Pte Ltd.
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