Here’s Why I’m Pausing My Crypto Investments

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I’m not selling, but I need to focus on other financial goals.


Key points

  • It is important to ensure that high-risk assets like crypto only make up a small percentage of your portfolio.
  • There is a lot of uncertainty about regulation and the economy that could drive crypto prices down even further.
  • Crypto investors should not ignore the dark side of the industry.

I am passionate about cryptocurrency and optimistic about how Bitcoin (BTC) and blockchain technology could eventually transform entire industries. I have continued to buy cryptos during the current market crisis. But more recently, I put my crypto purchases on hold, at least for a little while.

To be clear, I am not selling any of my existing investments. I plan to hold out for at least 10 years, and probably longer, and earn decent interest rates on many of my crypto assets. However, for me, it’s a good time to take a step back. Here are four reasons.

1. My portfolio is out of balance

Many experts recommend that crypto should only be a small percentage of your portfolio. And they’re right: this is a high-risk asset class that could crash completely. However, I spend most of my days reading and writing about cryptocurrencies, and sometimes I get a little overenthusiastic. Especially recently, when prices have been low, it’s tempting to scoop up a bit more crypto every time they crash further.

Crypto is currently around 20% of my portfolio, but I don’t want to sell any of my crypto. Instead, I will stop buying digital assets while I focus on building other parts of my portfolio, especially stocks. I also had to dip into my emergency fund recently, so topping it up is a priority. I am comfortable with my crypto investments, but now I want to focus on other things.

2. I want to see what regulation will bring

Crypto regulation is a divisive topic. Some believe this goes against the decentralized ethos of cryptocurrency, while others believe it is essential if the industry is to mature and thrive. I fall into this last category. But there are plenty of caveats, mainly that we just don’t know how tough the impending regulatory framework will be.

We are in a regulatory waiting game. Many countries recognize the need for more crypto rules, but have not yet decided what form they might take. Clear and well-thought-out regulations can boost investor confidence and solidify the industry’s foundations over the long term. Unfortunately, in the short term, there is a strong chance any increased regulation will hit prices hard. Additionally, there is no guarantee that eventual frameworks adopted by different countries will be crypto-friendly. With such a big cloud hanging over the industry, I don’t want to buy more cryptocurrency until it passes.

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3. The market may fall further

Regulation isn’t the only cloud hanging over the industry. Inflation rates are high, the Federal Reserve is withdrawing its pandemic-related economic stimulus, and the Russia-Ukraine crisis shows no signs of stopping. Many economists are warning that a recession is very likely, and we don’t know what impact this will have on the crypto industry.

The conditions that have driven the extraordinary growth of the crypto market over the past two years are well and truly over. If prices continue to stagnate or fall further, it is possible that many popular cryptocurrencies will fail. I understand the logic behind the “buy when there’s blood in the streets” advice. But I’ve done it for the past few months. If there’s worse to come, now I prefer to wait and see what the future holds.

4. I am increasingly uncomfortable with the darker side of crypto

I am extremely conscious of how I spend and invest my money. I opt for fair trade products and favor socially responsible investments. In crypto, I’m a huge fan of Cardano (ADA), which is on a mission to use blockchain to make the world a better place. But there are still too many elephants in the room to think crypto is an ethical investment.

Here are a few:

  • Money laundering: According to a crypto crime report from Chainalysis, criminals laundered $8.6 billion worth of cryptocurrency in 2021. This only includes money generated from crypto crimes, not money from traditional crimes .
  • Ransomware : Ransomware attacks – where criminals lock down a computer system or data via malware and demand a ransom to unlock them – have increased significantly in 2020 and 2021.
  • Lack of transparency: The idea that crypto could self-regulate has not proven to be realistic. Anyone can create a cryptocurrency token, and there are few rules in place to ensure that what you read on a website is true and accurate.
  • Overreliance on stablecoins: Tether (USDT) has already been fined for lying about its reserves. It’s the third largest crypto in the world, and we don’t know if it has enough money to support itself or what it does with people’s money. For all the assurances of Tether, I fear the industry is overly reliant on a token that could crash.

All is not bad, however. Chainalysis also showed that illicit activity now represents a lower percentage of overall crypto activity than ever before. As crypto adoption grows, legitimate use cases push out illegitimate ones. Additionally, law enforcement is getting better at tracking crypto and seizing funds from ransomware attacks and other criminal activity. However, money laundering, fraud, and ransomware are all issues that crypto investors cannot ignore.

At the end of the line

Cryptocurrency remains an exciting and fascinating industry with enormous potential. However, it also comes with a lot of risk and, unfortunately, criminals will always find ways to take advantage of new technologies. Above all, crypto investing is as much about your personal financial situation as it is about your belief in particular projects. For me, it’s time to practice what I preach and focus on other financial goals, at least for a few months.

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