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How to Start Your Investment Portfolio: Is the Crypto Space the Place to Invest?

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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.

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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.

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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.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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2 Comments

  1. mvppvm_07

    March 28, 2017 at 8:51 pm

    I agree that it’s crucial to ask appropriate questions. The ones mentioned are good. You want to do a follow-up article? Provide some answers to the questions you’ve put in the article. Offer the pros and cons to the answers to a targeted, but significant group of secondary currencies. (LITE, DASH, ETC, ETH). That will give some guidance regarding the kind of things to look for as answers to the questions asked. This would be helpful for those of us “sponging” toward success.
    Thnx.

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Articles

Fidelity Investments is Mining Cryptocurrency

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Fidelity Investments is a multi-billion dollar brokerage  that just so happens to be mining cryptocurrency. In fact, it has been at it for three years, using its own computers to harvest bitcoin and Ethereum.

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Profitable Experiment

CEO Abby Johnson recently told Fortune that its U.S.-based mining operation is “making a lot of money.” This comes despite running a relatively modest operation.

Hadley Stern, Senior VP of Fidelity Labs, described his company’s venture as an “experiment.”

The real reason we began mining, and still do, is to learn how the network works, how consensus works, how difficulty levels work,” he said in reference to the mining process.

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The key to profitability has been the dramatic rise in cryptocurrency over the past year. Bitcoin and Ethereum are the world’s No. 1 and 2 cryptocurrencies by market capitalization, and no-one else comes close.

Well Ahead of the Pack

The fact that Fidelity has been at this for three years speaks volumes about the company. Other, much bigger players are still dipping their toes in the market, but are unsure about how to proceed. Goldman Sachs is reportedly on the fence about starting a cryptocurrency trading operation, while J.P. Morgan has already begun handling customer orders for bitcoin-based instruments.

Fidelity is doing a lot more than just mining tokens. Earlier this year, it reached an agreement with Coinbase to let customers view cryptocurrency prices alongside other assets on their Fidelity homepage.

Coinbase is the world’s most funded cryptocurrency exchange with more than 7.4 million users.

Cryptocurrency Prices

The cryptocurrency market ended the week on a firm note, with bitcoin (BTC/USD) reaching a session high of $4,425.00. At press time, the index was up 1.6% at $4,368.

Ether is also trading higher against the dollar, with the ETH/USD rallying more than 3% to $305.

Ripple (XRP) lost momentum on Friday, but still managed a weekly gain of 21%.

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Chinese Government Eyeing Fresh Bitcoin Legislation?

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The Chinese government could roll out fresh cryptocurrency regulation in the coming months permitting licensed brokers to operate, based on recent information from Xinhua.

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The state-owned news publication recently revealed that the government is mostly concerned with stamping out illegal activity involving bitcoin and other cryptos. Government authorities could be planning to regulate the market by creating a licensing program with strict Know Your Customer (KYC) and Anti-Money Laundering (AML) systems.

The Case for AML

The need for KYC/AML protocols has long been raised by cryptocurrency proponents, especially in reference to initial coin offerings (ICOs). In response, the blockchain community has come together to create the Simple Agreement for Future Tokens (SAFT). The SAFT is both an instrument and open-source framework for token sales that vets accredited investors.

SAFT activity is quickly gaining traction, with the likes of Gizer recently issuing a presale of its ICO through SAFTLaunch.

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SAFT was officially created by Protocol Labs in close collaboration with AngelList and Cooley.

China’s Stance Looms Large for Cryptocurrency Market

Although digital assets have recovered from the China-induced flash crash of September, favorable regulations on the mainland could mean big business for bitcoin exchanges. Prior to the ban on ICOs and bitcoin brokers, Chinese investors were responsible for a quarter of all BTC trades.

According to Xinhua, China is likely to pursue a licensing program similar to Japan, a country that recently approved 11 cryptocurrency exchanges. CnLedger, a leading source of cryptocurrency news in China, recently had this to say:

“Xinhua News, official press agency of CN: Virtual currencies have become the top choices of underground economies. We shall adopt ‘0-tolerance policies’ towards crimes hidden underneath and take measures such as record-keeping, licensing, AML processes, real-name, limiting large transactions.”

Is China’s cryptocurrency ban temporary? It certainly looks that way. Regulators must already know that the ban hasn’t stopped mainland investors from buying cryptocurrencies next door in Hong Kong or Singapore. A saner approach to an all-out blanket ban is a tighter regulatory framework that will stamp out money laundering and other underground activities.

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Analysis

Tim Draper Has Made Over $110 Million Since 2014 With his Bitcoin Investment

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Tim Draper, the billionaire technology investor and prominent venture capitalist who has invested in some of the most successful technology startups in the likes of Coinbase, Patreon, SpaceX, Tesla, Box, FourSquare, has profited over $110 million from his investment in bitcoin less than three years ago.

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In 2014, Draper participated in the auction of 144,336 bitcoins by the US government and the US Justice Department, which were seized during the investigation into Silk Road, a dark web marketplace. Draper was granted the permission to purchase a batch of 30,000 at around $600 from the US government.

Upon securing 30,000 bitcoins, Draper told Fox Business:

“[I’m] very excited about bitcoin and what it can do for the world. Bitcoin is as big a transformation to the finance and commerce industry as the internet was for information and communications. If bitcoin were here in 2008, it would be a stability source for our world economy. Everybody should go out there and buy a bitcoin. Every investor who’s a fiduciary should at least be partially involved in bitcoin because it’s a hedge against all the other currencies. There’s a whole ecosystem being built that’s going to make commerce much easier with much less friction and safer.”

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Today, Draper’s 30,000 bitcoins are worth $129.9 million. Considering that Draper had spent $19 million purchasing the batch of 30,000 bitcoins in 2014, Draper has recorded a profit of over $110 million in less than three years.

While Draper held onto his investment in bitcoin, the US Justice Department was quick all of the 144,336 bitcoins seized during the Silk Road operation. According to various sources, the US government sold the majority of its 144,336 bitcoins at a price of $336, at $48 million. If the US government had sold its bitcoins in 2017, it would have generated an additional profit of around $573 million, as 144,336 bitcoins at today’s bitcoin price of $4,330 are worth $624.9 million.

Bitcoin price was below $350 in 2014. Today, it is over $4,330.

Since 2014, in addition to purchasing tens of thousands of bitcoins, Draper has funded some of the most successful bitcoin companies in the cryptocurrency market including Coinbase and Korbit. Earlier this year, Coinbase secured a $100 million investment at a $1.6 billion valuation, while Korbit was acquired by the parent company of a $10 billion gaming company in Nexon at a $140 million valuation.

Furthermore, Draper has not sold his stake in Coinbase and earlier this year, Brian Armstrong, the CEO of Coinbase, revealed that Coinbase is still at an early stage in terms of developing and scaling. Armstrong noted that it will evolve into the safest and most trusted exchange in the global market.

“Digital currencies are having their ‘Netscape’ moment. The pace of innovation has been accelerating and we are now seeing exciting projects and companies being built on top of digital currencies. We’re beginning to transition into phase three of our secret master plan. Our goal is to be the safest, most trusted and compliant, and easiest to use. Not the first to market with new assets. Especially at scale, it takes time to ensure any new asset we add is well tested and secure,” said Armstrong.

Coinbase is also one of the two exchanges in the US market apart from Gemini that is targeting institutional and retail investors by providing sufficient liquidity. As Coinbase and its flagship cryptocurrency trading platform GDAX continue evolve, Draper will position himself at the forefront of cryptocurrency innovation and disruption.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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