Eps 1: Cryptocurrency investment in recent times
— Cryptocurrency investment in recent times
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Host
Ronnie Rodriguez
Podcast Content
Cryptocurrency is a good investment if you are looking to get direct exposure to demand for digital currencies, whereas a safer, but potentially less profitable, alternative is buying shares in companies that have exposure to cryptocurrencies. Owning a few cryptos could boost the diversity of your portfolio, since cryptos like bitcoin have historically shown little price correlation to the US stock market. If you think cryptocurrency use will grow more prevalent over time, it may make sense to purchase some cryptocurrency right away as part of your diversified portfolio. If you are a more savvy investor, then you might be willing to swap out some of your existing crypto holdings for another cryptocurrency -- say, bitcoin for ethereum.
Just as there are different options when it comes to purchasing cryptocurrencies, you have several options when it comes to turning your cryptocurrency holdings into cash. If you are a first-time buyer, it is likely that you need to buy cryptocurrencies using normal cash. The easiest way to get your feet wet in cryptocurrency investing is by using U.S. dollars to purchase a cryptocurrency using a popular exchange such as Coinbase, or FTX. Instead of learning how to navigate cryptocurrency exchanges to trade your digital assets, you can add cryptocurrencies to your portfolio right from the same brokerage that you already hold your retirement account or another traditional investment account.
A crypto ETF would let investors purchase cryptocurrency right from the traditional brokerages they might already have accounts at, such as Fidelity or Vanguard. Securities and Exchange Commission chairman Gensler recently hinted investors could soon get access to a cryptocurrency ETF, which would be a new, more mainstream way of investing in cryptocurrency. Investing in a cryptocurrency ETF would still involve the same risks of any cryptocurrency investment: It is an asset portfolio, but would only diversify among various cryptocurrencies, all of which are speculative and volatile.
All cryptocurrencies are quite new, and it is hard to compare an asset-backed investment such as stock with digital currencies, which are only supported by the mood of investors. Finally, cryptocurrencies are a different type of investment, making cryptocurrency a harder thing to understand and invest in. Second, cryptocurrency is still a relatively young investment space. Our belief is that cryptos are viable investments today, but it is still very early days for them to evolve in terms of investments, as we explain.
Cestrian Capital Researchs proprietary view is that bitcoins are here to stay and are a worthwhile investment. Cestrian Capital Researchs proprietary interests lie with Bitcoin and Ether , two of the largest cryptocurrencies by market cap. Cryptocurrencies, according to Cestrian Capital Research, are best invested in or traded based on technology, especially as they are lacking in fundamentals. Bitcoin is a good proxy for the sector, as Bitcoin is the largest cryptocurrency by market capitalization, and the rest of the markets tend to follow its trends.
Prices for cryptocurrencies tend to fluctuate rapidly, and while this means many people made quick bucks buying in at a good time, many others lost money doing the same right before a crypto crashes. Bitcoin, for instance, is the oldest, and probably one of the least volatile, cryptos, yet bitcoins are still about four times as volatile as gold and the basket of global stocks . In theory, that means that the value of Tether should be more stable than that of other cryptocurrencies, and investors wary of extreme volatility of other coins are favored Tether. We can speculate about the possible value that cryptocurrency could hold for investors over the coming months and years , but the reality is that this is still a new, speculative investment with little history on which to base predictions.
Even a digital currency evangelist admits investing in bitcoin and its siblings remains largely a speculative gamble on an uncertain future. Over the past decade, crypto has gone from being a neglected asset to an extremely popular investment. Cryptocurrencies, having delivered some of the best returns in the past decade , are making new investors worry they might be late. Despite the volatility cryptos have faced, their core promises seem more believable today than they did a few years ago, and with a number of institutional investors getting on board, it seems unlikely the whole ecosystem will implode, though right-sizing is long overdue.
If you are considering buying cryptocurrencies now, given that prices have dropped, it is worth noting that there is no guarantee the crypto markets will bounce back. It is worth considering if cryptocurrency is a wise investment for you...especially with the current decline in prices, and the always-present possibility of major crashes . Cryptocurrency is still incredibly volatile, and rising interest rates caused Bitcoin to crash in 2022, as shady investors dumped what was still considered to be a risky investment. No one around here is using cryptocurrency as an asset class in any way but an investmentable, tradeable security, since nobody knows why they will actually ever need to spend any of it.
Some even let you finance purchases using a credit card, although that could be a risky move for a volatile asset like cryptocurrency, since the interest costs could compound losses should the value of your investment drop.