We Love Crypto, But Is It A Safe Investment?
When crypto assets first burst onto the scene in 2009 in the wake of the financial crisis, few people saw their potential. It was a little bit like the early days of the internet when people didn’t realize the enormous difference it would make to all our lives.
Over the last decade, we’ve seen the perception of crypto assets change. Rather than being viewed as something fringe, many of the world leading financial institutions and investment houses view them as “the future” if not the present.
Of course, that’s left retail investors, like you and I, wondering whether we should invest in crypto and whether this asset provides any real promise in today’s economy.
The crypto paradox is interesting. On the one hand, we have a range of currencies that promise zero transactions costs, allowing people to trade with each other across borders in a way that wasn’t possible before through the old banking system. But on the other, the price of these currencies in terms of fiat money is bouncing around all over the place. It seems as if people are jittery about accepting these forms of money as “real” – whatever real means. Naturally, retail investors are asking themselves whether investing in crypto is safe.
The good news is that investing in the space is becoming easier by the day. It’s now possible to buy bitcoin with Paypal, meaning that millions of people can seamlessly engage in bitcoin transactions without having to go through convoluted methods.
There are also so-called cryptocurrency exchanges popping up in stock markets all over the world, notably in South Korea where the government appears to be actively pushing new digital currencies.
Invest In A Portfolio Of Assets
Perhaps the best bit of advice for new investors is to put their money into a portfolio of assets. As we’ve seen with the price of bitcoin over 2018, the price of any individual crypto asset can move dramatically from one week to the next, and while there is potential for prices to go up, they can also tank. Smart investors will view crypto for what it is: a highly speculative investment strategy based on the notion that prices will eventually rise as demand for digital currencies goes mainstream. They won’t use it to fund their pensions.
Ignore The Fear Of Missing Out
Don’t want to invest in crypto assets? Then don’t. You should only invest in them if you have good reason to believe that they will eventually become a competing currency to traditional fiat (or perhaps become a store of value like gold). If you see flaws in the overall approach of digital currencies, then go with your instincts and avoid, avoid, avoid. Stick with traditional value investing if that’s more your thing.
ICOs are a relatively new concept. These initial coin offerings are attempts by managers of crypto assets to raise funds from the public. Yes, they’re hot right now, but they’re not yet mainstream. Be clear before you invest on whether you’re getting value for money for any investment you make.