Can any good come from the Terra-inflamed crypto cataclysm? Craig Jackson, Head of Growth at Australian crypto micro-investing platform Bamboo, sees opportunity for savvy investors and better times ahead.
Hi Craig. Some people are calling the Terra blockchain’s LUNA/UST fiasco crypto’s Lehman Brothers moment? Just how much more pain do you think it will inflict on the market?
At this stage, although people’s confidence has been tested by the LUNA/UST event, I think we’ve seen the worst of the market correction.
It’s not the first time crypto markets have experienced volatility, so for long-term investors this is nothing out of the ordinary. Right now I’m most interested in how the industry responds, particularly in the case of those engineering blockchain projects.
So do you think, perversely, some sort of good can come from it all?
While there will be a lot of investors suffering following LUNA’s crash, I do believe developers of other protocols will be scrutinising their existing and future projects to ensure LUNA and Terra’s failure can’t be repeated.
On the investor front, I think this will act as a strong reminder of the importance of doing your due diligence before investing into projects. And I think it could help the whole ecosystem go through a maturation process.
Cryptocurrency turns 13 this year, which is still quite young for a financial market, so there will be more development to take place in this regard I’m sure.
And lastly, there will be many investors who have been waiting for an entry point into the market and consider this their opportunity. This could lead to crypto going further mainstream as ownership becomes more widespread.
What about the US Fed-induced inflation-combatting concerns?
Do you think the market’s in for more pain this year due to macroeconomic factors beyond the Terra event?
I really feel like the worst has already happened and the market is pricing in the added risk posed by inflation and additional macro factors.
There’s a lot of discussion around crypto assets being “on sale” at the moment, but I do think many investors who’ve been waiting for an in will treat this dip as their entry.
That said, I’d encourage investors to arm themselves with as much information as possible to navigate what will continue to be uncertain times.
I’m guessing you still have a lot of confidence in the future of crypto?
Yeah, for sure. For many long-term-focused crypto investors like myself, the investment fundamentals haven’t changed, meaning investment theses will hold.
There will be many investors who haven’t done their due diligence who may be spooked away, but those with deeper conviction will continue to hold or even buy the dip.
Between 2017 to 2019 the price of Ethereum dropped 90 per cent with no change in fundamentals. So I’m still confident in the future of this asset class.
People love to claim the end of crypto because it generates clicks, but how many times have we heard ‘Bitcoin is dead’ while it’s still chugging along?
Is dollar-cost averaging a good bear-market strategy?
And what are the biggest mistakes you think many new, and even experienced, crypto investors make?
In a bear market, many investors are faced with the classic “falling dagger” conundrum where it’s easy to get the timing wrong when trying to buy the dip, resulting in lost value. I think it’s almost impossible to pick the bottom of a crypto market.
A classic trend I’ve observed is investors losing interest in the asset when it enters a bear market… but this has historically presented the best buy opportunities.
But yes, dollar-cost averaging – I believe smart investors will be setting up their automatic, DCA strategies and spending their new-found free time elsewhere.
And what that refers to is the strategy of investing small amounts more frequently to help reduce risk. Many investors will begin allocating small chunks into the market over time as it continues to dip, and then increasing frequency or volume of investment when the market turns and there’s some support.
On our platform in 2021 we actually saw users who diligently dollar-cost averaged earn returns of 66.21%, beating out users who tried trading – on average returning 56.22%.
This was kind of ironic because those who dollar-cost averaged would have spent far less time thinking about the market knowing their investment strategy was on auto. Sometimes less is more.
So, just DCA into the ‘blue chips’ – BTC and ETH? Or are you bullish on any other cryptos to follow this strategy with?
The fact is, Bitcoin and Ethereum continue to dominate the market and for good reason. We’ve seen a significant market event with Terra and LUNA – but while the market’s dipped, BTC and ETH have managed to hold fast during one of the most volatile periods in recent crypto history.
Outside of those two crypto assets, though, I do like the value Solana provides in filling a gap Ethereum’s left behind – as it has certainly become bigger, slower and more expensive.
There’s a real demand for a faster, cheaper network and I believe Solana offers that. Solana also seems to have mainstream adoption for NFTs which, in periods, has even overtaken Ethereum’s unique users.
Why is micro-investing a good way to invest/save?
Absolutely – it’s one of the key philosophies at Bamboo for two reasons. Firstly it allows users to get started with just a small amount of money, but it also promotes the concept of dollar-cost averaging, as we’ve mentioned.
For many new to investing, the idea of putting your money somewhere it could lose value is a really daunting prospect. But micro-investing with dollar-cost averaging is a popular way to invest into crypto because it helps navigate volatility.
It’s also such an easy way to go about your investing as it’s a matter of just setting up recurring buy orders into an asset.
Okay, so it’s probably about time we asked you this one and we’ll finish up with it… why use the Bamboo app for this strategy? What are its main advantages?
One of the main things is, we think Bamboo offers users the easiest way to get involved in the crypto market. Once you’ve spent just 90 seconds setting up your account, you have the ability to invest into blue-chip crypto assets like Bitcoin and Ethereum, while offsetting that risk with investment in more stable assets – gold and silver.
And Bamboo also provides the opportunity to set up round-ups and weekly top-ups, so that your account is set up to buy small (or big) amounts on a regular basis – dollar-cost averaging. Some users treat their Bamboo app like a supercharged savings fund where every paycheck they contribute a bit more to their crypto holdings.
And lastly, come tax time you won’t find an easier way to report on your crypto assets. The Bamboo app has an export button that spits out everything you need to report on your holdings and any profits or losses, taking out the nightmare many associate with investing in crypto.
This Q&A was lightly edited for clarity. The views, information, or opinions expressed in the interview are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article. The author owns Bitcoin and Ethereum and various other digital assets at the time of writing.