Investing in Cryptocurrency
If you’re considering investing into cryptocurrency, you may be wondering whether it’s the right move. In short – yes, but only if you take the right approach. This revolutionary form of smart tech currency is creating a storm around the globe, making headlines across international press and financial news. This method of investing has people divided, so should you incorporate cryptocurrency into your own investment strategy? We have produced a crypto guide, which gives the background and future for this highly versatile “virtual coin”.
Why should I consider investing into cryptocurrency?
If you’re not already aware of how cryptocurrency works, this is a digital asset – or “token” that acts as a medium of exchange. It uses strong cryptography to secure the financial transaction, control the creation of additional units and to verify the transfer of such assets. Cryptocurrency is a confidential and flexible way to trade; you remain in sole control of your digital assets and you cut out the middle man, as you won’t need to pay out any agent or broker fees or commission. Moreover, unlike traditional cash/credit systems, your “account funds” are unlikely to be checked or scrutinised, speeding up transactional processes.
The most commonly known cryptocurrencies are Bitcoin and Ethereum. Last year, there were 35 initial coin offerings (new crypto launches), which means the world of cryptocurrency and is fast gathering pace. Some see cryptocurrencies eventually replacing traditional, hard currencies in the future, such as the Dollar, Euro and Pound.
Underpinning all cryptocurrencies is ‘blockchain’ – this is a “digital ledger” where transactions are logged and publicly recorded – and it’s an incredible form of technology. Blockchain allows free transfer of cryptocurrency through a decentralised environment that is secure and fully transparent. The data is held within an interlinked network of computers. For example, Ethereum is a blockchain that offers advanced “smart contract” technology:
“self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network.”
Global companies investing into blockchain
One of the big advantages of blockchain is the fact there’s no single point for hackers to target, which minimises the risk of an entire exchange going down. As well as the trading flexibility, blockchain is an attractive alternative for B2B companies, especially the supply chain, as the movement of goods can easily be tracked in a transparent manner. Moreover, any irregularities can be tracked all the way back to its point of origin guaranteeing a good level of quality assurance and enabling businesses to easily conduct investigations – for example, the food industry can easily track batch information for food safety purposes.
There has been a steep rise in the number of large global corporations trading with cryptocurrency and integrating blockchain into their own systems – for example, the Ethereum Alliance now boasts members such as JP Morgan, Microsoft, Santander, HSBC, Cisco, Deloitte, Intel, BP, Shell and Mastercard. Therefore, if you are looking to keep up with major players, cryptocurrency is definitely worth considering.
What’s the best strategy for crypto investments?
Although cryptocurrency has seen market volatility over the past few years, there are gains to be made, but only if you take the right approach. Some crypto investors have been incredibly successful – between 2011 and 2017, Bitcoin generated an increase of value of at least 25,000 per cent, whereas Ethereum’s value rose by 2,700 per cent, which could be considered the fastest growing cryptocurrency ever. Bitcoin’s share of the market has fallen, but still sits at the top with Ethereum following close behind. If you are looking to choose between these two cryptocurrencies, or if you’re considering another, then it is advisable to do some research before investing.
We strongly advise a long-term strategy where you can off-set any losses and always make sure you have a strong financial buffer in place. Never invest more than you can afford to lose. However, used as part of a diversified investment portfolio, cryptocurrency is likely to be a real gamechanger in the coming years. So, hold on to your hat, and you could enjoy lucrative returns in the future.