The idea of investing for the average person can often seem like a daunting prospect. Many people may be put off by the idea of investing their hard-earned cash, let alone what they should invest in. Not only that, but the rise in digital currencies such as Bitcoin and Ethereum is further adding confusion as to whether this is a good place to start an investment portfolio.
Yet, it doesn’t have to be that way.
The beginning of 2017 has proved an incredible start for Bitcoin. In March it increased to a high of $1,350 prior to the Securities and Exchange Commission’s (SEC) decision on the first Bitcoin exchange-traded fund (ETF). However, as March ends, Bitcoin’s price is hovering under the $1,000 mark, according to CoinMarketCap, triggered by the SEC’s rejection of the ETF and investor selling as continued talks about a potential Bitcoin hardfork circulate.
But, even though the currency is susceptible to fluctuating prices, some may still consider it a viable asset for investment. Yet, despite excited proclamations by Bobby Lee, BTCC’s co-founder and CEO, tweeting a bitcoin price prediction of between $5,000 and $11,000 by 2020, investing in Bitcoin is not for the faint hearted. Knowing when to buy is crucial as you will want to buy low and then sell high, but be prepared for massive swings in value.
Speaking to Hacked, David Motta, Internet entrepreneur, investor and CEO of business consulting firm, ACQURE Business Solutions, thinks that the cryptocurrency space can be extremely profitable.
“I believe a revolution is underway and increasingly we will see new incredible developments involving the new currency and the blockchain technology in general,” he said.
However, while it may be too late to see any significant returns with Bitcoin, Motta says there are other coins on the market that are demonstrating promising movement and could, potentially, go the way that Bitcoin is.
For example, Ethereum, the second largest cryptocurrency after Bitcoin, with a market value of $4.2 billion is just shy of $50 for one Ether, significantly cheaper than Bitcoin, but growing day by day.
Whereas, Dash, the third largest cryptocurrency at a market value of $746 million, is currently valued around $104. Not bad, considering at the beginning of March its price was hovering closer to $44 and two months before it was listed around $8.
When to Start Investing
Phil Town, investment advisor, hedge fund manager and author of two New York Times best-selling investment books, Rule #1 and Payback Time, says it’s never too late to start investing, which can certainly be applied to the crypto space.
Considering its relatively short lifespan, new investors may only be just discovering cryptocurrencies and the possible benefits it can provide, which can pose the risk of knowing what to look out for.
As there are hundreds of altcoins available waiting for you to swap your fiat money for the cryptocurrency, Motta recommends that you ‘become a sponge and learn as much as possible about the space.’
“Since it’s so new, it’s very easy to believe in promises made by not so reputable companies due to lack of knowhow or having nothing else to compare to,” he said.
He adds that if there are any digital coins you’re thinking of investing in, you should read their whitepaper to understand what exactly they are doing and what they plan to do with your money.
Some questions he says you should consider are:
- How do they plan to create rapid consumer adoption?
- What’s their technology like?
- How did their Initial Coin Offering (ICO) go?
- Did they follow the right steps and use a public escrow?
- Are they utilizing a mining or staking process?
If you feel happy with what you’ve read in the whitepaper and are still happy to proceed, start small and only invest a small portion of your money. This will give you an idea as to how cryptocurrencies works, how to trade it and how to handle it safely in a wallet. Just because a cryptocurrency may be doing well now doesn’t mean that’s always the case. Proceed with caution and avoid investing large sums.
How to Buy It?
To buy cryptocurrency you do so via online exchanges and platforms. If you’re interested in bitcoin you can buy the currency in fractions or ‘bits’ instead of the whole bitcoin with investment starting as low as $10 on some exchanges.
A few beginner-friendly exchanges to consider include Coinbase, LocalBitcoins, Blockchain.info, and Bitstamp, which was the first regulated and licensed virtual currency exchange in the EU.
As bitcoin has a finite supply, which is capped at 21 million bitcoins, the system will stop producing new coins. Every four years the number of bitcoin halves with the cap expected to be reached by around 2140. However, it’s not known what impact this could have on the value of the currency.
However, in the whitepaper ‘Bitcoin: A Disruptive Currency,’ Chris Burniske of ARK Investment Management, which was the first public fund manager to invest in bitcoin, said:
Given its predictable growth and ultimate fixed supply, bitcoin could become a store of value superior to fiat currencies in the long term. The trajectory of bitcoin’s supply growth will not change, unless the economic majority agrees to it.
So Should You Invest?
Motta concludes by saying that the cryptocurrency space is still ‘very young’, but that it has ‘huge potential to grow.’
While bitcoin can’t be hacked (as far as we know), manipulated or changed, it’s still vulnerable through exchanges or digital wallets, like online bank accounts.
If you’re interested in the crypto space and are looking for a way to start your investment portfolio, doing so with cryptocurrency could be a viable option. As the saying goes, though, don’t put all your eggs in one basket; diversification is key.
Research the market, know what you’re getting into and don’t put your life savings into something that could potentially collapse just as easily as it started.
Featured image from Shutterstock.