2021 was the year of the ‘alternative’ investment. We saw Tik-Tok financial advisors, meme stocks and ‘FOMO’ acting as the social barometer for where the smart money goes. The popularity of digital currencies has coincided with the rise of retail investors, those who’ve predominantly entered the financial markets in the last few years.

Cryptocurrency has always been considered an alternative investment due to its highly volatile and unstable nature. However the lure of getting rich quick has thrown caution to the wind. As of December 2021, there were over 6,000 digital currencies, the majority of which are less than 3 years old. I occasionally ask my Instagram followers to share their best and worst financial decisions, and unsurprisingly crypto is usually the only answer that appears on both sides of the coin.

The old way of investing consisted of a core portfolio of well diversified stocks, intended to spread risk and often taking a long term view on growth. Occasionally exposing a fraction of money to something which offers more adrenaline than equities. At times this involves putting money into emerging markets, start up companies, or ventures that are not yet proven. But even when you take such risks there’s usually a sweetener in the form of tax breaks (EIS or SEIS). Something which you don’t have with cryptocurrency.

According to the Crypto trading platform Coin-base, Bitcoin which leads the Crypto pack has an average investor hold time of 75 days. The explanation for this pattern of behaviour is usually that investors wish to take profits when times are good and then subsequently ‘buy the dip’. As such the usual principle of ‘time in the market > timing the market’ doesn’t seem to apply.

With the cost of living on the rise and average UK salary at £28K, there is an increasing urgency for passive income to surpass main income streams. This has led to people taking more risk, in a shorter space of time, with less capacity for loss. Like most things, people are always on the look out for the next big thing, and the pursuit of the unknown can come at a great cost. In the last few months we’ve seen several cases of ‘Pump & Dump’ where an individual or group of people intentionally inflate the value of a digital coin through false or misleading information, with the intention to sell at a peak and leave the investors at a loss.

Predictions on how high some crypto coins would climb in 2021 fell short so what can we expect to see in 2022?. The leading digital currencies now have more competition than before, and Non Fungible Tokens ( NFT’s) is now also a regular topic for the dinner table discussions. Thanks to the owners of Facebook, the eagerly anticipated ‘Metaverse’ economy will undoubtedly give prominence to both digital currencies and NFTs.

Investors are already anticipating the demand for digital assets, virtual e-commerce, and much more which will be created from this new way of living. As usual the early adopters will control the monopoly once it becomes mainstream. So now is the time to do your research if you want exposure to this.

Whether you currently hold Crypto or not, it’s safe to assume that 2022 will deliver more turbulence as the alternative investments look to test new highs and find stability amongst their investors. Central Governments still pose a risk of introducing regulation, which would cause major concern for the decentralised currencies.

In all cases investments should be chosen based on your time horizon and how much risk you’re prepared to take in order to achieve your desired returns. if in doubt, seek professional help and don’t allow FOMO to ‘cntrl-alt-delete’ your hard earned cash!