When an asset jumps in just a few days, it’s all too common for people to assume that they’re simply too late to get any more upside. Worse, some investors treat an asset’s price flying as a trigger to buy more than what’s advisable. That reflex is especially dangerous in crypto, where prices frequently get quite far ahead of reality, only to trip over it and leave buyers with brutal losses.
On that note, the privacy coinMonero(CRYPTO: XMR) just delivered exactly that temptation on a silver platter, with a steep multi-day run. Monero’s price rose by a shocking 19% on Jan. 12, and then jump again on Jan. 13, making for a 44% gain in just five days. (To be sure, the crypto surrendered some of those gains in the following days.) In the past, many commentators, including yours truly, have argued that it’s a better idea to avoid this coin than to buy it. Is that still a smart move, or has something fundamentally changed about this asset that makes it a buy despite its soaring price?
Image source: Getty Images.
So, what’s making Monero’s price go wild?
If you’re looking for a major protocol upgrade, news of a major exchange relisting, or a sudden favorable change in the way regulators have tended to treat the coin and other privacy-focused crypto assets, you won’t find it. There’s not any obvious catalyst for the coin’s rise, though there is a lot of chatter about privacy coins and privacy tech on social media, which, to be clear, does not count as a catalyst either. And thanks to the coin’s privacy features, it’s difficult to conclusively identify who is buying it, so there isn’t necessarily a satisfying answer forthcoming.
Looking at its investment thesis, there also isn’t any new wrinkle to justify its valuation rising higher. Monero’s privacy-by-default design enables private transactions for everyone right out of the box, which is all well and good, but it’s also the source of the asset’s investability problem.
As long as financial regulators around the world view privacy tech as a threat to their ability to conduct oversight, this asset is going to be confined to the edges of the crypto-financial system, with exchanges consistently pressured to avoid listing it.
The price climbing by a lot doesn’t change that dynamic.
It’s easy to assume that the regulators who are skeptical today will eventually become more comfortable with privacy coins.
But financial regulation is not built around normal human needs like privacy, and you probably shouldn’t hold your breath in hopes of that changing. Those regulations are built around promoting enforceability of laws by mandating anti-money laundering (AML) and know your customer (KYC) rules, not to mention other requirements about traceability and the ability to conduct forensic investigations of capital flows when something goes wrong.
The Dubai International Financial Center (DIFC), a critical global crypto-financial center, just provided a timely example of this posture as it relates to Monero specifically. Newly imposed rules in early January prohibit privacy coins for a wide range of purposes, though the regulations stop well short of an all-out ban on holding them. This isn’t the only regulator with concerns by any means, but it’s a fresh reminder that assets like Monero simply aren’t fully legal in many important jurisdictions.
And that inevitably feeds directly into access. Even if you like Monero, you need a plan for getting your capital into the coin, and then how to take it out later, ideally after a gain. The major crypto exchange Kraken, for example, delisted Monero in 2024 for its clients in parts of Europe as a result of regulatory changes, which limits access for many mainstream investors and inflicted a headache on holders who purchased it before the delisting.
Could the situation improve? Sure; one bullish scenario would involve the implementation of more favorable rules that let crypto exchanges list privacy-preserving assets. A second scenario is if there’s continued migration of purchasing activity to exchanges based in jurisdictions without any regulations prohibiting privacy coins. But neither of those scenarios make Monero an easy holding to feel good about buying right now.
So is Monero still something to avoid? For most long-term investors, yes, as it’s simply not wise to invest in an asset that’s in the process of being restricted in important places. Let the excitement pass, don’t fall victim to crypto FOMO (fear of missing out), and keep your capital in assets you can easily access.
The time to buy and hold Monero for the long term may yet come, but for those who don’t already own the coin, it probably isn’t right now.
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