Should I Invest in Crypto Currency “Markets”?

Bitcoin, the most well-known of the Crypto currencies is worth £23,660 per ‘coin.’

If you had bought into Bitcoin 5 years ago, you would have paid £1,639, so your profit before tax could now be around £22,000

Unless it was stolen, like the theft of 119,754 Bitcoin in 2016 from the cryptocurrency exchange Bitfinex. The proceeds—worth $72 million then, but $4.5 billion now—were siphoned from users’ accounts via some 2,000 fraudulent transactions.

Or lost, crypto researchers Chainalysis suggests that out of the 18.9 million Bitcoins in circulation, as many as 3.7 million have been lost by owners who have forgotten a password or the computer hardware has been stolen, broken or thrown away in error.

Crypto currencies are neither regulated by a Government or based on an underlying asset. So when they go wrong you have literally nothing to fall back on.

The best that can be said of it, is it’s an increasingly recognised store of value, which people trade and therefore has the potential to appreciate. Or depreciate.

Like Gold?

Yes, but when gold drops on value, it eventually stops because the underlying asset can be used to make wedding rings and sold for a profit again. It is a better store of value as a result.

Or like shares?

No, shares are parts of a business, which has cash flow, customers, IP, property, stock….. A public company is also regulated and run by Directors who have to be named and will face jail if they misappropriate funds. Shares are much safer.

So like cash then?

Crypto is like cash in that if you keep it under your mattress and the house burns down, that’s it. If a Crypto server holding your coins catches fire, your coins are gone with it too. But if you put cash in a bank, it’s protected by the Goverment up to £2m in NS&I accounts and £85,000 in UK bank accounts, so cash is also safer.

But I don’t want to miss out?

If you want to speculate in Crypto by putting a very small amount of your disposable money into one of the many new currencies, for fear of missing out, then here are the things to think about to avoid disaster:

• Plan your finances first
  • Have a rainy days fund
  • Be free of bad debt
  • Plan your long term financial needs
  • Save and invest in a properly diversified portfolio
• Operate a satellite and core investment portfolio
  • The core should invest in quality funds of the worlds top companies
  • It should then have a satellite of Government bonds to protect you in times of recession
  • And if your finances are such that you can afford the risk, you can have a smaller satellite invested in alternatives such as Crypto.

How to invest in Crypto

• To buy cryptocurrency, first you need to pick a broker or a crypto exchange that will also let you exchange into Great British Pounds Stirling.
• The only way to decide if the exchange is likely to be safe until this industry is regulated is to use one of the most well-known crypto currency exchanges such as Coinbase, Gemini, Binance and eToro. They can seem complex at first.
• Cryptocurrency brokers take the complexity out of purchasing crypto, offering easy-to-use interfaces that interact with exchanges for you. Some charge higher fees than exchanges, and beware those offering to do it for free. There will be a catch like making a mark up on the price per coin or selling your data.
• Once you have purchased your currency you need to decide how to store it while you wait to see if the market goes up or down:
  • Leave the crypto on the exchange in a crypto wallet attached to the exchange.
  • Or transfer it to either:
    • Hot wallets that are stored in the “cloud” - but there’s a risk of hacker theft as they’re connected to the internet.
    • Cold crypto wallets aren’t connected to the internet, making them more secure in terms of preventing hackers stealing them. They are devices, like a USB stick or hard drive. But if you lose the code associated with them or the device breaks, you may never be able to get your cryptocurrency back.