Diversification has always been an investing fundamental, and until BitCoin and Crypto currencies came along it meant having Gold, Silver, or Bonds alongside your stocks. Now the landscape has changed and its more important than ever to keep an open mind as we move forward with our money.
As prices of many crypto-currencies increase this year owning them can help hedge against the volatility and eventual downturn of the stock market. Here’s why we believe now is a great time to enter the digital currency market.
If you’ve been holding out on learning more about investing in crypto currencies, or believe they are nothing more than a fraud, it’s time to take a second look. Even Wall Street is taking notice and investing in this space.
JPMorgan, in it’s 2018 report titled “Decrypting Cryptocurrencies: Technology, Applications and Challenges,” states that cryptocurrencies are not only “unlikely to disappear”, they could also play a role in diversifying one’s portfolio. BlackRock, too has come out and said “We see cryptocurrencies potentially becoming more widely used in the future as the markets mature.” This is huge, as BlackRock is one of the largest investment firms in the world with over $5.7 trillion under management. When the big players get in the game, the big money follows. This could send the next crypto boom higher than anything we’ve ever seen and create opportunities most us will not see again in this lifetime.
For many, BitCoin and Crypos weren’t even on the radar until the first ‘boom’ when Bitcoin went above $19,000 creating media and watercooler buzz that was immediately followed by it’s first ‘crash’. The stock market, over time, is volatile too, and the crypto market is no different. In fact, it’s volatility is extreme. Understanding it, and being comfortable with it is key to be successful owning or playing in the crypto markets. As we move closer and closer to one of the longest running bull markets in history, you need to understand that this party is winding down and moving some of your investment money to this or another commodity just makes sense.
We don’t like investing in something that doesn’t better the world in some way. A house that can be fixed up and provide a family a nicer home to live in, a Biotech company that is innovating the way we treat and cure cancer, a technology company that allows us to live healthier lives via a wearable that can monitor our health, heart and activity. You get the picture. The same is true with Cryptocurrencies.
Now, understand there are over 1,300 crypto currencies -most of them are worthless and don’t add any value to the world and some are designed to simply separate you from your money. There are many, however, that we are just beginning to understand will power a new and more secure future. For example, Ripple “XRP”, is a cross border payment solution for large financial institutions based on blockchain technology. Ripple can settle funds in as little as four seconds, where before it could take an international payment a few days to post and at a very high cost to the institution. This new technology is going to save banks millions per year, and institutions such as Santander and American Express are already in trials with Ripple. Note during the last crash in early 2018, the value of Ripple ‘XRP’ didn’t get hit as hard as other cryptos and bounced back very quickly.
Another is ZenCash, which is a privacy platform and a way to send and receive money anonymously. Additionally, it’s a platform that lets you publish and store documents anonymously as well as communicate in an encrypted way. In our world where our privacy is being stripped from us everyday, this new platform will only grow in value.
These are only a few examples, and clearly the space is changing everyday. It’s akin to the wild west, or the early days of the internet and fortunes will be made and lost, so it’s important to stay plugged in to current, accurate information and do your own due diligence.
We recommend hedging with Crypocurrecies for the reasons above, and many others, but we also recommend playing it safe. Never invest more money that you are comfortable losing completely, and keep position sizes small. As an example, buying $200-$400 of a Crypto is more than enough to possibly return you $4,000 with a 1,000% return, which is not at all uncommon. Again, buying the right Crypto at the right time is key here, so stay tuned to themoneybeat.com for future updates in this space.