Do you wish to know whether digital currencies like Bitcoin and Ethereum are the asset groups a smart investment to make with your money?
This article has gotten made to let you know whether you should invest in Bitcoin or any digital currency or not.
Applauded by fans as market disturbance liberation and gets trashed by critics as a risky, unpredictable creation, Bitcoin, and other digital currencies are always making their way to the headlines.
Bitcoin has relished many climactic ups and downs since 2020 December.
For the first time, on 16th December, Bitcoin’s price hit $20,000.
Then on 3rd January 2021, the value of a Bitcoin went flying over $34,000. It meant that this digital currency gained around $5,000 in its value in the first two days of 2021.
After that, on 9 February 2021, the value hit a whopping $48,000, making it a record high, after Tesla’s makers unveiled that he bought cryptocurrency of around $1.5bn.
After 12 days a Bitcoin made a new record as it went flying at #58,354 before dramatically dropping after two days to $44,845.72, which is 18.4% for a day and went to a decline almost to a quarter from Sunday.
After that on, March 13, the crypto hit a high record of $61,701.
Bitcoins hit the headline on 17th March, when Morgan Stanley, the first US bank that offered access to Bitcoin funds to its wealthier clients. However, restricting it to only 2.5% of the total net worth of the investor.
After that headline, a few days later, Elon Musk, the CEO of Tesla, announced that customers could now use Bitcoin to buy Tesla Cars.
These are some vital steps towards accepting Bitcoin as an asset category, and now more institutional money is getting pushed into digital currency.
However, some enigmas remain around Bitcoin and other cryptocurrencies.
Satoshi Nakamoto is the pen name by the assumed individual or individuals, who created Bitcoin, made and sent Bitcoin’s unique execution programming, and considered the first blockchain information base.
What is Bitcoin and how does it work?
The notion behind digital currency like Bitcoin is not a complicated way that people use to send digital monies online.
It has a similar process as transferring from one online bank to another.
Blockchain technology gets used by cryptocurrencies. Blockchain technology is a method of sending data in cyberspace.
However, it much different from our daily currencies like dollars and pounds.
Cryptocurrencies are ‘decentralised’. That basically means that no financial group, whether it a government or banks regulates cryptocurrencies.
One of the advantages, Cryptocurrencies are a global thing, which means that the value of digital currencies has the same value in every country on the globe.
This aspect of the currency makes it easy to transfer money to any individual around the world, without the stress of the rates of the exchange.
No matter what you invest in, there will always be a risk of the investor losing his money.
Extreme volatility is one of the biggest of cryptocurrencies’ disadvantages. Many people reported how they have to wait for some time to take the cash because of technical mess-ups.
What are the biggest three cryptocurrencies?
The first major and well-known cryptocurrency is Bitcoin. It began in 2009 and is still a market leader. `As of March 2, its market capitalization, meaning its total worth is around $1.075bn.
The second and third cryptocurrencies are Ethereum and Binance. As of March 22, respectively, their market caps are $206bn and $41bn.
Many challenging cryptocurrencies, entitled altcoins, have come into the market since 2009.
How has the Bitcoin price performed?
Since September 2020, the price of Bitcoin has been rising steadily.
It is the demand by many investors because of many reasons including the following two:
- Paypal announced that next year through their app, US customers will be able to buy and sell cryptocurrency.
- Further, Tesla has said that it will start accepting cryptocurrencies as a payment method for its cars.
One Bitcoin, since March 22 costs $57,217.
However, even before, cryptocurrency made steady rises like at the end of 2017, before making a crash in 2018.
The most defining factor of the cryptocurrency market might possibly be extreme volatility.
Let us look at the prices of Bitcoin in an investment terminology of profit and loss.
Let us say you invested at the beginning of 2020. That would mean that by the end of the year you would have gained a profit of 300%.
However, let us say, you invested at the beginning of 2018 and sold it at the year-end on New Year’s Eve, then you would have lost 73% of your money because the Bitcoin value had collapsed.
You are not alone in thinking about what market forces increase the values and crash it.
If we were to look at it in general, then the digital currencies’ values are much connected to the supply, demand, and number of competitors.
It is complicated to determine what influences these sudden performances.
Overall, this situation makes the digital currency a higher risky asset to invest in.
What are the new Cryptocurrencies to watch?
Smaller and newer cryptocurrencies include Bitcoin Cash, EOS, Litecoin.
Many might have the temptation to invest in cryptocurrencies as newcomers. However, being cautious is the most important thing.
More volatile currencies than Bitcoin are smaller altcoins. They are mostly speculative investments.
If you want to invest, then according to the experts you should start by investing 5% or less amount of your money.
How risky are cryptocurrency investments?
Before you invest in Crypt, have a think about whether you would buy a house and live in Rapid City, South Dakota.
South Dakota is a city in the United States, which has more than 75,000 residents.
Furthermore, this city has the most unpredictable weather on the globe. It’s a city where you will face snow blizzards or summery thunderstorms without a warning, and a sudden rise in temperature before everything even calms down.
Why have we said to think of that? Well, the weather of Rapid City is a great way to describe how Bitcoin & Co behavior can be. In simpler words, it can be crazy as hell.
When you chose to invest, have in mind that you might face a loss of some or all of the money your investing.
MPs in 2018, called the cryptocurrencies a “Wild West industry.”
These further do not get regulated by the watchdog of the UK, which adds another layer of risk.
The Financial Conduct Authority, from January 6, 2021, will be banning the sales of complicated derivatives that depend on the movement of the cryptocurrency.
This means that financial services will not be able to provide their retail consumer’s contracts for difference, spread bet options, futures, and exchange-traded notes that focus on digital currencies.
Andrew Bailey, the governor of the Bank of England, recently state how ‘nervous’ he was about Bitcoin getting used as a payment method by various people. Even before, he has warned the investors of cryptocurrency to get ready to ‘lose all their money.”
Is Bitcoin a Good Investment?
Bitcoin is a hugely “high-risk” side of the investment spectrum.
The cryptocurrencies price is volatile. This means that some can just go into loss; some can be scams and at a time one may get a huge profit in return.
Danny Cox, from Hargreaves Lansdown, the financial services company, states:
“Cryptocurrencies could remain niche, become mainstream, vanish without trace or anything in between, and any investment should be considered as very high risk.”
However, the chief executive of the Crypto platform Ziglu, Mark Hippersom, argues that the digital coin is going to become all the rage.
“With many massive known brands like Tesla and Starbucks now accepting cryptocurrencies, (Starbucks is testing a new method, where their consumers can pay for their food or coffee using the mobile pay cryptocurrency Bakkt Cash) gives us less reason to doubt that one-day cryptocurrencies will get used much like the traditional currencies.”
As you would with any investment, do as much as needed from you.
However, do not put all your hopes on a company or cryptocurrency. Spread your money to different cryptocurrencies, to spread the risk and only risk the money that will not affect you, if you were to lose it.
Is there a less risky way to invest in Crypto?
According to Gavin Brown, an associate professor in financial technology at the University of Liverpool, the less risky way to invest in cryptocurrency is “Stablecoins”.
“Stablecoins is developing and can become the potential solution to the issues of crypto assets volatility and credibility. When compares to cryptos, stablecoins have physical assets behind them, much like traditional currencies.”
Two of the assets are DAI and TUSD; both get backed with a US dollar, meaning one coin has a worth of $1.
Maker (MKR) platform hosts DAI. Investing in crypto platforms is much safer than actual currency.
As he says that the risk is low and profits are also very low or none.
Tether, the largest stablecoin, gets pointed out by Brown. He says:
“Tether bounced back during the pandemic’s [first] lockdown, not only maintained its position as the largest stablecoin but more than doubled its market value – from $4.6bn to $9.2bn [it is now worth $22bn, as of January 4]. It shows volatility has gone down.”
He further adds that possible investors shouldn’t fundamentally see tether as the next huge thing. “In theory, it won’t ever be worth more than a dollar. But it’s potentially an interesting option for any varied portfolio to include tether – it could be a slice of stability if [other] things start to suffer.”
According to Brown, there is less risk in making long-term investments with companies linked to cryptocurrencies.
For example, Facebook shares are planning to launch a currency called Diem. JPMorgan has the digital JPM coin is equal to a US dollar, and the Wells Fargo bank developed a US dollar associated stablecoin.
How to buy Bitcoin?
There are various funds and investment trusts that have the Cryptocurrencies exposure and are likely to be less risky than investing in buying the currencies themselves.
Where can I buy Cryptocurrencies?
The two world’s largest Bitcoin trading platforms are Coinbase and Binance.
They are said to be the easiest and quickest way for new users to buy various cryptocurrencies like Bitcoin.
Another way to buy digital currency through the Zigly app or on eToro Gemini, the investment platform founded by the Winklevoss brothers. It is a digital exchange place, where users can buy, sell and store their cryptocurrencies.
The Financial Conduct Authority rewarded an operation license and the New York State Department of Financial Services regulates it.
What are Fees?
Users will have to pay fees to buy and sell Bitcoin and other cryptocurrencies. The fees include transaction fees, withdrawal fees, trading fees, escrow fees, and deposit fees, which is normally a few percent of the value of the total transaction.
What about a Bitcoin fund?
Various companies now plan to launch Bitcoin funds. However, they are facing many issues with regulatory agencies.
Its main objective is to facilitate the process of the investment of cryptocurrency and make this category of the asset more attractive.
It will still be volatile. However, it would make it easier to sell the investment and get the money instead of investing it directly.
There are some ways that one can get light on cryptocurrency with the existing investment funds.
For example, the investment company, Ruffer, or an investment fund, in December 2020, announced that it had put 2.5% of its portfolio on to Bitcoin.
However, if you looking for blockchain technology, then the INVESCO Elwood Global Blockchain exchange-traded funds utilize the Elwood Blockchain Global Equity index to track companies that get considered to have the “ability to participate in the blockchain ecosystem.
It’s holding of the top 10 includes Samsung and Taiwan Semiconductor Manufacturing.
What are the Options of Bitcoin?
It got reported on March 26, 2021, that around $6bn worth of Bitcoin contract options were to get expired later that day.
In January around $4bn in contracts options got expired.
According to the experts, such Bitcoin options will assume the price trend in the market of cryptocurrency in the next few months.
However, what are the Bitcoin options?
A type of financial derivative that gives you the right, not the obligation to buy or sell Bitcoins at a set price before the specified expiry date is Bitcoin options.
The set price gets known as the strike price.
Unlike the purchase of Bitcoin cryptocurrency, Bitcoin options let you take a speculative position of the future of its place in the market, where you guess whether it will go up or down.
You would purchase the call option if you think that the market price will increase.
If what you guessed was right and the market price got increased above the strike price of the Bitcoin options. You will be able to buy the Bitcoin at the set price. How much the value of the Bitcoin rose after your strike price will influence the amount of profit you will get from that trade.
If your prediction happens to be wrong, and instead of rising, it falls, then you can let the contract expire without any profit and only lose the paid premium at the beginning of the trade.
It’s been a while since Bitcoin options have traded on cryptocurrency. However, they did not get regulated.
However, now Bitcoin options are now getting slowly introduces by various regulated institutes.
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|67||Basic Attention Token||BAT|
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|113||Bitcoin Standard Hashrate Token||BTCST|
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