Wells Fargo Bank advises crypto investors

Wells Fargo Bank recently released a cryptocurrency background writer acknowledging that the number of cryptocurrencies is growing at an ever-increasing rate, thanks to the recognition of cryptocurrencies as a viable investment tool. The many discussions at the regulatory level are also an indicator of the progress of this industry. In this paper, Wells Fargo Bank’s global strategy team has provided some guidance to help investors determine the timing of their investment decisions.

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It is not too late to invest in cryptocurrencies

Although the crypto sector is almost 10 years old, newcomers fear that it is too late to achieve attractive returns, especially in light of recent years’ performance for most cryptocurrencies: the price of Bitcoin has e.g. recorded an average annual rate. at 216% per year since the creation of the first block of the network in 2010, while for the S&P 500 index, for example, it was only 16% per year. However, according to analysts, it may be misleading to focus solely on historical results, especially given the sector’s maturity: Most cryptocurrencies have been around for less than five years, and even Bitcoin, the first asset on the market, is four times more volatile than gold, still considered the safe haven par excellence.

The maturity of the sector is still low

The authors of the document believe that the crypto sector is no longer at an early stage of investment, so the focus should be on training for newcomers. Cryptocurrencies follow an adoption curve similar to that of other modern technologies, such as the Internet.

In the case of any new technology, adoption is slow before reaching a turning point, leading to acceleration. The Internet is an example of this phenomenon. In 1995, about ten years after its invention, the Internet was used by only 14% of Americans and less than 1% of individuals worldwide. By comparison, around 3% of people worldwide have used cryptocurrencies in the last twelve months. The authors of the article pointed out that the curve of the cryptocurrency adoption curve is very similar to that of the most advanced technologies such as the Internet; in this case, it is possible that the adoption is approaching the inflection point.

Comparison of cryptocurrency adoption and the Internet

Wells Fargo Bank investor advice

These results led Wells Fargo Bank to offer the following three tips:

  • Be patient: There is no need to rush to invest, and the sector still offers many untapped investment opportunities. The total capitalization of the crypto market is lower than for a technology giant such as Apple;
  • Caution: Due to market maturity, Wells Fargo Bank recommends that investors use investment services from a financial professional instead of making a purchase directly on a stock exchange or investing in mutual funds, investments or ETFs (exchange traded funds);
  • Beware: Investors should remember the development of the Internet in the 1990s. The early stages of investing are often marked by boom and bust cycles, as seen in the dot-com bubble. ”. It is difficult to determine winners and losers in a budding industry. Many of the most popular websites from the 90s are no longer relevant today. There are almost 16,000 cryptocurrencies at the moment, and if history repeats itself, the vast majority of them will disappear from the market.

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