Correction in Crypto Markets Likely to Continue

Investing in capital markets has always been more art than science especially when looking at the short-medium term. The reason being is that human psychology is the largest factor affecting performance in the short-medium term and human psychology and emotions can cause assets prices to deviate from their fundamentals. Looking at the cryptocurrency markets recently we are experiencing a moderate correction that does not seem to want to find a bottom and I think will continue for awhile longer.

With investing in cryptocurrencies unfortunately there are no fundamental valuation metrics that have been created which makes determining the fundamental value of a cryptocurrency difficult. It also makes comparing a cryptocurrency's current value with past values difficult as to determine if it is trading at a price that is expensive or cheap relative to past values. I suspect fundamental valuation metrics could be created to provide investors some idea of valuation but as we do not have these yet the price of all cryptocurrencies are supported entirely by human psychology and at the moment this is getting decidedly negative as prices continue falling downward.

Looking at past corrections in Bitcoin and other cryptocurrencies we see that these corrections can be long lasting and horrific as prices fall for seemingly long periods of time. I suspect something similar is going to happen again. So as an investor I would not buy any cryptocurrencies yet, in fact it might be worthwhile to sell a portion of your portfolio and leave it in US dollars. As this correction continues I would wait until prices have stabilised and are beginning to rise again. I think it will be a few months before this occurs so it likely is best to wait this correction out as I see prices being quite a bit lower in a few months then they are today.