Cryptocurrency investment prorams

In essence, they help firms raise cash for the development of new blockchain and cryptocurrency technologies. You may well hardly be able to sell until the newly issued cryptocurrency is accepted for listing on an exchange. Though popular, ICOs carry a lot of risk, are not suitable for crypto beginners, and require a multitude of additional considerations. Outsourcing Active Investing Alternatively, if you prefer to outsource your active investing, there is an ever-growing number of funds you can leverage.

Many of the active funds will achieve this by picking the right cryptocurrencies at the right time. While this may mean higher absolute returns, it also means that somebody is managing your risk. This can prove significant in the high-volatility world of crypto: Double-digit percentage price swings within 24 hours are not uncommon. A disadvantage of these funds is that their fees are higher than those for passive products. Another option is to construct the exposure yourself—something that virtually nobody would do in the equity space given the multitude and low cost of passive products.

However, in the crypto space, it is more appealing given the current dearth of products. Passive Investing Below are a few available products for creating passive cryptocurrency investment exposure. Vehicles Tracking One Currency One approach is to buy a vehicle that tracks one very liquid cryptocurrency.

Since Bitcoin BTC is the original cryptocurrency and has long dominated the space, the few passive products in existence today track BTC. Furthermore, you do not have to worry about logistical issues like how to buy, sell, or store your cryptocurrencies. However, one disadvantage is that they may be trading at a premium to underlying net asset value.

Vehicles Tracking Multiple Currencies Going one step further is an investment product that tracks several cryptocurrencies. Currently, various products are being developed for this purpose. As always in investing, this diversification will likely provide better risk-adjusted returns, such as a higher Sharpe Ratio.

That is, although you will not match the returns of the single best-performing cryptocurrency, your risk should drop more than enough to compensate for this. It is not yet clear how such products will allocate between the various cryptocurrencies, but the obvious options are either equal weighting or market capitalization-based weighting.

In any event, your fund manager will handle this weighting for you. These futures are meant to help manage price volatility and allow investors to speculate on the price of BTC without having to directly own it. Second, in geographic regions where BTC trading is prohibited, such as Bolivia and Bangladesh , these futures would allow investors to participate.

Needless to say that futures are advanced financial products, so you should procure adequate information and advice before using them. Cryptocurrency Storage and Monitoring Storage Perhaps unsurprisingly, security is of utmost importance when it comes to cryptocurrencies. This includes writing down private keys on a piece of paper, storing them on a hardware device such as Trezor or Ledger , or using a cold storage company such as Xapo or Swiss Crypto Vault which store your BTC private keys in Swiss bunkers.

For either type of storage, you typically simply send your coins to the public address of your storage. Once you need your coins, you can send them to wherever you need them, like an exchange account. The trade-off here is between liquidity and security because you may need hours check exact time with your cold storage provider to get your coins out of more secure storage, which can be an eternity in crypto trading time.

So, the decision around how much of your crypto portfolio goes into what kind of storage depends in part on your propensity to trade and your view of imminent market movements. Still, security and storage should be key items on your crypto to-do list.

Monitoring Just as investing in another asset class, you should monitor your investment, even if you are a long-term holder. This includes tracking price information on sites such as coinmarketcap. Personally, I also like the mobile app Blockfolio , which allows you to input your crypto portfolio and track its value in real time. To stay up to date with the newsflow in a rapidly evolving industry, social media are indispensable for cryptocurrencies, including Twitter, Reddit, and Medium.

On Reddit, you should join the appropriate boards, while on Twitter, you can search for the appropriate hashtags such as BTC and bitcoin for BTC, or LTC or Litecoin for Litecoin and follow frequent, knowledgeable commentators on the subject. There are also other sites that provide more technical data for example, number of transactions or hash rate.

These sites often differ by the specific cryptocurrency you are looking at, but for BTC, valuable resources include bitinfocharts. Tax Treatment and Regulations Few would argue that tax regulations have fully caught up to the rapid development of the cryptocurrency space. In , the IRS Revenue Ruling dictated that cryptocurrencies should be treated as personal property , with gains or losses on purchases or sales.

Therefore, capital gains or losses should be recorded as if it were an exchange involving property, and if utilized as payment, it should be treated as currency but must first be converted to its fair market value. Still, the ruling left many questions unanswered. And, even within the US, states are treating cryptocurrencies differently. Consider New York State, which remains wary and has created the BitLicense system , which imposes guidelines on crypto companies conducting business with New York residents.

In contrast, Vermont and Arizona have both recognized smart contracts and have assigned legal standing to records tied to blockchain , the underlying technology of all cryptocurrencies. Go Forth and Discover This is undeniably a lot to digest. However, if you are an equity investor, there surely was a time when you hardly knew anything about the markets. Perhaps you timidly opened your first brokerage account, bought your first mutual fund, then your first individual stocks, international stocks, and perhaps eventually graduated to options and futures.

Is it worth it? I am a biased person to ask. And I admit that there is a steeper learning curve, but you are also entering a new asset class at an early stage, possibly providing you with opportunities harder to find in the relatively efficient world of established asset classes.

For the record, I do not advocate substituting all other asset classes with crypto—merely that crypto should also be considered, though you should remain aware of its risk. If you are curious and decide to move forward with crypto investing, then you may want to start slowly and simply.

I personally started by putting an amount of money that I was comfortable losing completely into one of the established exchanges, bought a little of the mainstream cryptocurrencies, and soon started to get a feel of whether this was for me. The best way forward for you will depend, of course, on your specific circumstances and preferences and may well include not investing in crypto at all.

Just do not simply ignore the space and discard it out of hand without doing a little research for yourself. Good luck. Disclaimer: The views expressed in this article are for informational purposes only. The article is not intended to be investment advice, and should not be used or relied upon as such. Seek a duly licensed professional for investment advice. Furthermore, nothing in this article is an offer to buy or sell or a solicitation of an offer to buy or sell any security, product, service or investment.

All information and opinions expressed in the article are believed to be current as of publication and are subject to change without notice. The author has not received and will not receive direct or indirect compensation in exchange for expressing specific views in this article.

Understanding the basics How do you buy cryptocurrency? You can buy cryptocurrencies via exchanges, finding a counterparty, cryptocurrency ATMs, or directly via a private bank since some banks are now offering cryptocurrency trading services and related products. How do I sell my cryptocurrency? You can sell cryptocurrencies via the same buying channels: exchanges, finding a counterparty, cryptocurrency ATMs, or directly via a private bank.

Learn More Bitcoin mining Bitcoin mining is the process of creating new bitcoin by using computers with specialized chips to solve complicated mathematical puzzles. The first so-called miner to solve the puzzle can earn bitcoin rewards by running such programs using systems that use massive amounts of electricity to mine the cryptocurrencies—a process that has come under criticism because the mining process is not considered environmentally friendly.

Learn More Digital currency Digital currency is a form of currency that is also popularly known as digital money, electronic money, electronic currency, or cybercash, because they only exist in electronic form, versus a physical form such as paper cash or metal coins. Learn More Altcoins Altcoins generally speaking are cryptocurrencies other than Bitcoin.

They share characteristics with Bitcoin but are also different in terms of how they are created and verified. According to CoinMarketCap, Bitcoin and Ether alone accounted for nearly two thirds of the total cryptocurrency market, with altcoins making up the rest. Learn More Hot wallet A hot wallet is a cryptocurrency storage application that is always connected to your computer and cryptocurrency network, and as such they tend to be more vulnerable to cybersecurity breaches and theft than so-called cold storage methods.

Hot wallets are used to send and receive cryptocurrency, and manage tokens you possess.

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