Forget Superman, there's a new hero in town. For the retail investor, cryptocurrencies proved to be out of this world in 2017, with numerous virtual coins delivering four-, five-, and in some rarer instances six-digit percentage gains during the year. Though arguable, it could be the single-greatest year we've ever witnessed for any asset class throughout history.
Just how good were cryptocurrencies? At the end of 2016, the combined market cap of every single virtual coin combined equaled just $17.7 billion. However, by late December, the aggregate value of all cryptocurrencies combined had risen to as high as $654 billion. That's an increase in value of almost 3,600% in one year. Comparatively, the stock market has delivered historic returns of about 7% per year, inclusive of dividend reinvestment and adjusted for inflation.
However, bitcoin comes with more than just euphoria. It also comes with a ton of volatility. Retail investors are what predominantly drive its price, since institutional investors haven't been willing to trade on decentralized cryptocurrency exchanges. And it's no secret that retail investors tend to wear their emotions on their sleeves, leading to quick swings higher and lower in bitcoin. According to data aggregated by Mauldin Economics from Coindesk, bitcoin has plunged by a minimum of 22% from peak to trough 20 times since April 2013.
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