How to invest in crypto – an absolute beginner’s guide
Get the basics down before you jump in, writes Jonty Sacks of alternative investment fund manager Jaltech.
In the world of cryptocurrencies, time passes at an extremely rapid rate, writes Jonty Bags alternative investment fund manager Jaltech.
So, to familiarize yourself with this popular form of investing, learn about crypto innovations, and the many ways to invest, you must first master the basics. But where to start ?
What is Crypto?
First, we need to understand the meaning of “cryptocurrency” as one of many digital currencies that are not tied to any country or government.
Cryptocurrencies, or more generally tokens, are forms of digital assets that circulate without requiring a centralized monetary authority such as a bank.
Currently, they are mostly used as a form of speculation or investment in promising new technologies that seek to disrupt finance and other industries. They are the technology to facilitate the transfer of value over the Internet. While cryptocurrencies can be used to buy everyday items in some stores, they are more often traded as digital assets for investment profit.
How do you know if someone is investing in cryptocurrencies? They tell you. They fill the room with stories that are mostly about how much money they or someone they know has made, or how certain cryptocurrencies are performing in the market.
The thing is, the people who have made a lot of money investing in cryptocurrencies are the ones who have been investing for years and have been able to withstand periods of volatility.
For those of you who haven’t invested, you might still be concerned about the known instability of cryptocurrencies. What you should really be thinking about is how do you get the right risk-adjusted exposure to this asset class, as it has produced incredibly high returns?
A small amount of investment can give you exceptional returns without having to take huge risks – a concept called asymmetric returns.
For example, the investor who had the foresight (and the finances) to invest R10,000 in Bitcoin 10 years ago would today have an investment value of around R35 million. However, they would only lose R10,000 (much less than R35 million) in the worst case.
How to invest?
What is the difference between a player and an investor? An investor has interest, research, and patience, however, in contrast, the game is fueled by get-rich-quick, emotion, insider tips, and bar chatter.
To buy cryptocurrency, you need to open an account with an exchange where you can transfer real money to buy cryptocurrencies such as Ether or Bitcoin. When it comes to cryptocurrencies, utility and adoption is one approach. This means that cryptocurrencies – or the underlying technology they represent – must have real utility in society and must be widely adopted or show signs of adoption. Otherwise, their price movements are more than likely driven by speculative investors, which can lead to a sharp rise followed by a sudden fall.
Choose the right ones
How do you make sure you have the Google and Facebook and not the Yahoo and My Space of cryptocurrencies? One method is to ensure that your personal crypto wallet allocation consists of various cryptocurrencies that have good security credentials and show signs of widespread adoption, thus avoiding the need to speculate and choose winners.
Choose the right basket
Initially, one must define essential criteria for cryptocurrencies to be successful in the long term.
Look for the following features:
Wide adoption – use market capitalization as a key indicator to determine adoption
Globally and readily available on at least three reputable public exchanges
Traded in large volumes – this provides investors with liquidity to exit short-term investing
Excellent safety record
Only seven cryptocurrencies meet these criteria:
- Chain link
Article by Jonty Sacks of Jaltech – Click here to learn more.
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