- In just one month, Gustavo saw his 1000% profit disappear and he initially suffered a 66% loss of what he had invested in NFT games. To make matters worse, the goods are now worthless
- 2022 marks the opposite of risk, which is why cryptocurrencies in the market are being penalized. The major cryptocurrency, Bitcoin, lost 45% of its value last year
- As an asset class that is a consolidation class, based on technologies that are still being demonstrated and have the greatest potential to generate wealth in the future, cryptographic assets are more volatile than traditional ones.
Lawyer Gustavo Campos, 24, decided to invest 20% of his estate in NFT games in September last year. By investing in non-consumable tokens in games like Crypto Planes, Monster Grand Prix and BombCrypto, which rewarded players with cryptocurrencies, he soon saw the amount invested grow by 1000%.
“A friend found out about this. We started talking about it and we saw it live in a via streaming which speaks to crypts. In our minds, it was still just the beginning, there was a lot to come, ”says the lawyer about the decision to enter the digital assets market.
However, if the upward movement accelerated, the fall was even faster. In just one month, Gustavo saw his profits disappear and he lost 66% of what he had initially invested. To make matters worse, the goods are now worthless.
In a year marked by risk aversion, cryptocurrencies are being severely punished. The major cryptocurrency, Bitcoin, lost 45% of its value in 2022. Ethereum, on the other hand, devalued 58%. In May, only one of the top 40 cryptocurrencies was positive.
“The winter of cryptography for NFT games was even worse. It’s an even more risky asset because there’s a lot of fraud in the middle,” he lamented.
Hashdex Portfolio Manager João Marco Cunha explains that as an asset class that is still consolidating, based on proven technologies that have the greatest potential to generate wealth in the future, cryptocurrencies are, in fact, more volatile. than the traditional ones.
According to Cunha, they are sensitive to external factors, such as investor risk aversion, and internal issues, such as hacking protocols or exchanges – crypto-asset trading platforms. “That’s why the prices of cryptocurrencies generally change more than traditional assets,” he says.
QR Asset Management Investment Manager Alexandre Ludolf understands that the history of cryptocurrencies – and their volatility – recalls the beginning of the U.S. gold market in the 1970s. He believes that as the asset class strengthens, so should volatility.
Therefore, in order to protect the heritage and not be hijacked by such oscillations, most specialists consulted. E-Investor indicates that people invest between 1% and 10% of their capital in this asset class. For those who are new to cryptography, it is even lower, ranging from 1% to 5%.
“You only have to invest what you have to lose. Sure, there are many potential gains, but the market is extremely volatile, says Caio Villa Uniera’s investment manager.
Felipe Medeiros, a cryptocurrency analyst and partner at technology and financial education company Quantzed Criptos for investors, said those who already invest in other asset classes should start with cryptocurrencies like bitcoin and ethereum while exploring the rest of the market and understanding whether or not. volatility matches your risk profile.
The ideal for those who do not invest, he believes, is to make a gradual contribution. “That way, it will perform at the right average price and also adapt to volatility without much fear,” says Medeiros.
However, it is important to understand that cryptographic assets are only recommended for investors with long investment horizons for a few years, said João Marco Cunha of Hashdex.
Before you invest, consider the asset
Fernando Bevilacqua, a 23-year-old marketing analyst, realized at the end of last year that investing in Crypto Planes would be a good idea. In the case of game-related cryptocurrencies, there was a chance to play races every day after getting a token. As a result, the player was awarded a cryptocurrency.
However, it took a short time for the coins to lose all value. “The dollar was worth $ 3.50 when I put it in, it was worth a month later. I watched the money melt. It turned to dust, ”says Bevilacqua. “It’s almost a pyramid scheme. If people stop signing up, you stop having money to run the game. The game had to bring people together to make money, ”he lamented.
The investment was made with his brother and they knew the risk involved, but they did not imagine that everything would happen so quickly. Today, he thinks the game was basically a pyramid scheme.
According to Felipe Medeiros of Quantzed Cryptos, this is the correct theory of the marketing analyst. He says most of the nearly 20,000 cryptocurrencies out there are scams, trying to deceive him with various discourses.
“Because the environment is not yet regulated, these scams are facilitated and appealed to the investor, driven by promises that will pay off in the short term,” Medeiros says.
According to him, according to the Axie Infinity game, several generic versions of the game, including Crypto Planes, were “feverish” in 2021. With high profits, they soon flooded the market, but time has shown that they were there. all just pyramid schemes, enriching the creators and deceiving many investors.
Therefore, experts recommend that investors study their theses before investing. Felipe Vella, a stock analyst at Ativa Investimentos, said that these are the theses that will enable assets to overcome the moment of risk.
“Some cryptocurrencies will die in the winter. Now we’ll see which ones have the real demand, which ones solve a problem. They don’t exist for people to speculate and make money,” Vella said.
I bought the crypto-assets and I’m lost, should I sell them?
These are the basics mentioned by Vella, which should guide an investor who has already invested in cryptocurrency assets and is now suffering a bitter loss.
According to Alexandre Ludolf, Investment Director of QR Asset Management, for those who need liquidity and see large losses in the portfolio, it is easy to say that it is not appropriate to sell and hold for the future. But he believes it is necessary to eliminate projects that do not have a solid foundation in the long run.
Joash Marco Cunha of Hashdex added that past investment decisions should not interfere with the current portfolio. That is, despite losing with the last fall, the investor should look for an assignment that matches his or her risk profile. This can mean selling, owning, or even buying more.
But despite the recent downturn, experts also understand that the asset class needs to recover from the fall. Felipe Medeiros says there is a consensus among the world’s largest financial institutions, large investors and governments that there are cryptocurrencies left to stay.
He pointed out that, in terms of technology, the crypto market should only recover when there is an improvement in the macroeconomic scenario, more specifically in US inflation. This situation in the US economy is forcing a yield curve, which is bad for active technologies.
“We understand the importance of spending the winter naturally and positioning ourselves for the next upward cycle. Despite the drop in prices, we see the strength of the ecosystem, that a lot of quality things are being built, ”says Ludolf, of QR Asset Management.