Whether you’re a modern money guru or not—everyone is talking about cryptocurrency right now. The digital money movement is on up with everyday folks, from your mum to your mates, investing their hard earned cash in it.
But can you really make money on it and what are the risks you need to look out for? We caught up with crypto expert Mena Theodorou, co-founder of Australian cryptocurrency platform Coinstash which aims to make crypto investments work harder for everyday Aussies, to answer all of your burning questions.
What Are The Main Benefits Of Investing In Cryptocurrency?
Because of its decentralised nature (not being governed by one central organisation) cryptoassets offer a level of independence impossible with other means. When you keep your money in a bank or financial institution, you are often at the mercy of other people or organisations. With cryptoassets, especially those stored in hardware wallets, your investment is usually non-managed by other firms. Cryptoassets are also independent to fiat currencies (like USD, pound sterling or yen for example) and most are not tethered to gold, hence aren’t subjected to as much impact from economic volatility.
Cryptoassets have high liquidity, which means it is easy to purchase or sell at a price close to market rate. Liquidity is important because it brings about better pricing, faster transaction times (depending on the blockchain that supports the token) and increased accuracy for technical analysis.
Easy To Get Started
Getting started in the crypto market is easy, especially compared to the stock market. You can simply create an account, get a digital wallet and track all your assets with no effort at all. Look for platforms that offer multiple layers of security and compliance such as identity verification (KYC), 2FA and are registered with ASIC.
Long Market Hours
The crypto market is available to trade 24 hours a day, seven days a week because there is no centralised governance of the market.
For Those Who Haven't Yet Had The Courage To Dip Their Toe In Crypto, What's The Best Way To Start Investing?
Find a local and regulated platform or exchange that offers 24 hour support and has local licenses. In the case something goes south, you want to make sure your investments are protected by local laws, and you have the adequate around-the-clock support from local customer support teams.
You also need to work out your risk appetite and how much you can afford to spend on cryptoassets. Remember—cryptoassets should generally be part of a diversified investment portfolio. It’s important to understand that cryptoassets work differently to stock market investments. In addition to being a store of value, they have more utility than assets like stocks or bonds and are widely seen as an alternative to sovereign or fiat currencies like the Dollar, Yen or Euro.
Choose your crypto wisely! Although Bitcoin, Etherum, Litecoin or Dogecoin have dominated the headlines, there are over 4,000 cryptoassets currently in existence. Don’t just buy into the hype: make sure you do your research, read their whitepapers, understand the trends and technology before making your decision.
How Do You Keep Your Crypto Safe?
Store your cryptoassets in a safe, secure place such as a crypto wallet. Don’t leave your crypto on the platform you buy it from, unless it’s specifically connected to a highly secure wallet. In the past we’ve seen major platforms, from MtGox to Binance hacked—so it’s important once you buy, you store safely. A digital wallet is a highly encrypted software platform that stores the private and public keys that connect you to the blockchain where your cryptoassets exist.
Crypto wallets can take many forms such as a desktop wallet that’s installed locally and available offline on your computer, online wallets which are on the cloud, mobile wallets as apps on your smart device, and hardware wallets which are stored on a hardware device such as a USB.
Some even have the ability to allow you to earn interest on your investments, access loans and make payments, so your Bitcoin does more than collect dust. This is the kind of functionality we’re also building at Coinstash.
Is There A Minimum Amount Of Cash You Need To Have To Start Investing?
No, there is no minimum or maximum amount you need to start investing. Start with an amount that you are comfortable to experiment with and grow from there. You may want to adopt a dollar-cost-averaging strategy where every month, you allocate a certain percentage of your salary to making investment.
What Are Some Of The Biggest No-No's When It Comes To Investing With Crypto?
Never, EVER give someone your private keys
Regardless of the situation, NEVER provide the information to your crypto wallet to a third party. Think about this like the password to your bank account. An exchange or tech devs behind the cryptoasset will never ask you for this information proactively. If they do, that’s a massive red flag for a scam. In the same vein, never send crypto to strangers on the internet promising deals. If it sounds too good to be true, it probably is.
Don’t get overconfident
You don’t want to become another example of a crypto investor that got overly confident and lost everything. While the crypto market is one that invokes a lot of passion, it’s important to keep your emotions at bay and take a calculated approach when investing. Nobody is a Wall St mogul when it comes to crypto.
Don’t buy into the hype
The fear of missing out (FOMO) has led many investors down the dark and gloomy road to disaster. You don’t want to peg all of your life savings on an obscure project because of something you read on Facebook. It might seem tempting to jump into a cryptoasset that’s skyrocketing and imagine the huge profits that you could possibly rake in. However, it’s important to not act on impulse and buy into the hype, as you will end up with more pain down the track than profits.
How Can People Look Out For Scams?
The best way to enter in the space and avoid scams is to invest with platforms that are regulated. There is no better way to avoid scams. Do your due diligence on the platform and make sure it has all the necessary licenses to operate in the country where you live in.
Can You Really Make Some Decent Cash Out Of It?
Yes, you can earn a significant profit. One of the most common ways is to stake your cryptoassets. Staking refers to the process of investing or locking up your funds in a cryptoasset and earning new cryptoassets in the form of interest.
Another way to make some cash off cryptoassets is to buy and HODL (hold on for dear life). Most investors buy coins like Bitcoin, Litecoin, or Ethereum and wait until their value rises. Once their market prices increase, they sell at a profit. However, it’s important to keep in mind though that due to the volatile price of most cryptoassets, the returns may not make up for the initial investment.
Some assets even have their own earning-mechanism built into them. Look out for smaller projects you can buy at a low price that offer unique ways to reward you for loyalty and utilising their token.
What Are Some Of The Best Companies To Invest In?
Bitcoin is considered the original cryptoasset, and its launch in 2009 is what started the whole cryptoasset movement. Bitcoin—and the blockchain technology on which it operates—was invented by an individual or group of individuals operating under the pseudonym Satoshi Nakamoto. Bitcoin was put forward as an alternative to the fiat monetary system.
Bitcoin Cash (BCH)
Bitcoin Cash is the fourth largest cryptoasset in terms of market capitalisation. This is partly due to its connection to the original BTC. Bitcoin Cash was designed to address the slow transaction speeds of Bitcoin. It allows larger blocks, ensuring improved scalability and faster transactions. As long as Bitcoin remains a market-leader in the crypto world, Bitcoin Cash will continue to grow in popularity.
Ethereum is historically the second most popular cryptoasset, however it is very different from Bitcoin. Ethereum is actually the name of the blockchain platform and Ether is the name of the cryptoasset. Ethereum is the blockchain platform for ‘smart contracts’.
Litecoin is another potential fiat alternative and a prominent rival for Bitcoin. Its creators hope Litecoin will eventually be used to pay for everyday goods and services. Litecoin has positioned itself as a more practical and technologically superior alternative to Bitcoin. Litecoin transactions can be confirmed by the P2P network significantly quicker than Bitcoin transactions.
Much like Ethereum, Tezos is a decentralised cloud-computing network. Yet, Tezos has distinguished itself as one of the industry’s top altcoins, by offering alternative methods of network consensus and governance.
Any Other Hot Tips Or Advice When It Comes To Crypto Investing?
When investing in cryptoassets, it’s important to choose a platform or exchange that provides you with opportunities to put your digital assets to work. Speculating on performance and watching the coin’s price fluctuate is not investing. If you’re not actively trading during the week and participating in the market regularly, chances are, your coins are sitting idly in a wallet.
Instead you should pick for secure wallets or platforms that allow you to put your cryptoasset investments to work. At Coinstash for example, we’re developing an ASIC-regulated platform that allows you to earn interest on your cryptoassets, access loans and actually pay for things.
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