How Does Crypto Perform in an Inflationary Environment?

We hear from Stephen Ehrlich, CEO of Voyager Digital, on how he sees crypto performing as an asset class in the current environment, and how it is changing the way we build wealth. 
 
What are some of the biggest factors and trends that will shape the crypto industry/space in 2022?
 
Consumer confidence in crypto is rising. In our inaugural national Crypto Confidence Survey, 64% of respondents said they believe cryptocurrency will gain value in 2022, and 48% said they believe cryptocurrency will be widely accepted within the next three years. 
 
This basic progression–from awareness to trust to adoption–is how disruptive technologies grow to become part of the lives of everyday people. It is accurate to call crypto disruptive now, but at some point in the not-too-distant future, consumers will look at digital currency as ordinary and normal, like how the internet went from a novelty to a utility in around a decade.
 
We believe digital currency will replace fiat as the plumbing for a financial and commercial ecosystem that has far less friction and far more efficiencies for builders and innovators. 
 
How are cryptocurrencies changing the way we build wealth?
 
Broadly speaking, crypto is giving retail investors another avenue to diversify and a straightforward way to invest in the digital infrastructure that will drive the next iteration of finance and the internet. Right now, what retail investors want and deserve from crypto trading platforms is a wide choice of coins to consider and an easy way to trade.
 
In 2021, Bitcoin outperformed all major asset classes. And the number of ‘hodlers’ is trending upward, signaling crypto’s long-term viability as a way to build generational wealth. So we believe there are long-term and short-term reasons to be bullish on the asset class.

Crypto prices have been climbing higher. What do you think are the main factors contributing to this? And do you see this upwards trend continuing into 2022?
 
Bitcoin just put up eight days straight in the green, topping out at about $48,000 prior to cooling off around $44-45k. While markets can have short-term memories, it’s clear the long-term trend is up. Now, the real question is how does crypto as an asset class perform against an inflationary environment? 
 
What’s recently happened, which would have been waved away as lunacy just a few years ago, is that crypto has shown a correlation to more established markets as concerns surrounding rising inflation increased. As the initial speculation and concern about inflation and how fiat currencies would react dissolved, we saw increased growth within traditional markets that mimicked the crypto market. 
 
With the caveat that none of this is financial advice, we anticipate that, with upcoming Fed rate hikes and the justified concerns about inflation not going away, the market will see crypto grow at a healthy pace which will correspond with the movement of traditional markets. 
 
How should average investors approach crypto? 
 
The basics of investing in crypto are pretty similar to other assets, but the difference of potential becomes apparent when people discover how much easier crypto makes it to diversify, build and maintain a portfolio. Investors should do their own research to find out which cryptocurrencies are best for them. They can invest through a publicly-traded brokerage like Voyager, and when investors use the Voyager app, they can utilize a dollar cost averaging strategy (DCA), limit orders and recurring buys to invest steadily, with an eye towards the long term.

This interview originally appeared in our TradeTalks newsletter. Sign up here to access exclusive market analysis by a new industry expert each week. We also spotlight must-see TradeTalks videos from the past week.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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