The three decisions I needed to make before investing in cryptocurrencies

Some would’ve called me naive with my decision to invest into cryptocurrencies.

I was no expert on what they were, what they did or the landscape surrounding this investment class.

However, I was confident in my decision because I knew:

“I don’t need or want to become a cryptocurrency expert, I just need to make smart decisions.”

Decision 1: Will this be valuable in the future?

Yes, the media was the little devil on my shoulder telling me I had missed the boat.

It was February 2018 and I had missed the huge growth of the cryptocurrencies. All the media outlets were talking about how the cryptocurrency bubble had burst, losing 50% of its growth in one month. I could have had just taken the news at it’s worth and walked away — but I’ve never really trusted the media 😝

And lucky for me, I had made some new friends that were in the cryptocurrency space that gave me another viewpoint. The value of cryptocurrencies is within the underlying technology — blockchain.

Even though I had little knowledge about cryptocurrency investing and the blockchain specifics, the blockchain passion peaked my interest. And the more I spoke with and read about blockchain technology, the more I knew this was a valuable technology of the future.

But why did I believe this?

The biggest influence on this decision was the startup environment. Out of the nine startups in the 2018 Kiwibank FinTech Accelerator, three of them were utilising the power of blockchain or investing in cryptocurrencies.

And this was in an average sized city in New Zealand. I could only imagine the innovation acceleration around this technology and the growth of startups around the world looking to maximise this new technology.

I was convinced that this technology was valuable in the future and was definitely no fad.

Decision 2: Can I find an expert to do it for me?

Coming into the cryptocurrency market after the big boom was risky. The market was clearly correcting itself, there was still a sense of FOMO (fear of missing out) in my brain and the number of untrustworthy options to invest seemed to be littered everywhere.

So before I made my next step towards whether I was even capable of investing into cryptocurrencies, I had to analyse the right way to enter the market.

The first, and obvious way was to work it out myself.

Now if you remember, I “attempted” to go through the entire process to purchase a portfolio of digital assets. Safe to say, I did not trust in my experience or skill set.

It was just way to complicated and I didn’t have the dedication to become an expert.

This is the scenario that ran through my head if I decided to try it myself:

The first step was determining what my cryptocurrency portfolio looked like. I had heard of Bitcoin and Ethereum as these were the love children of the media, but there were over 1,000 others to look into. The easiest decision would be to put a little in each of the top ten based on market cap…

But looking at other traditional investment portfolios, they don’t equally invest in the top ten assets, so why should that be the case with cryptocurrencies. I felt like the easiest solution wasn’t the appropriate decision here.

But if I moved forward with the assumption and invest equally across the top ten cryptocurrencies, what about the rest of the decisions to make. Which exchange to use? When to enter the market? How do I store these? Would I actively manage it?

Ultimately, I knew deep down I did not trust myself to go through the complicated process of creating an intelligent portfolio. Just like I don’t trust myself to fix my car. Just like I don’t trust myself to build a house.

I knew I needed to get an expert to do it for me if I was to ever invest into cryptocurrencies.

Decision 3: How would I feel if I lost the lot?

Recently, my wife and I bought a house. Actually, this is our first house, and to be honest, I was not ready for all the expenses and hidden costs associated with not only the purchasing but the maintenance of it all.

With my cash flow drastically reduced (most of it going towards the biggest purchase of our lives — a mortgage), I still decided to invest money into the high-risk investment of cryptocurrencies.

Why?

Well, I looked at my entire investment portfolio. I understood high-risk high return possibilities. I saw a great opportunity. I accepted 5% of my portfolio to go to riskier investments. I was content with losing this investment.

Now, I wasn’t just throwing my money on a roulette table — which many believe cryptocurrency investing to be.

I had made my previous two decisions to determine that the opportunity of this asset class was appropriate for me at this time, and I understood the risk.

Even though, as of today, 18th June 2018, the crypto markets are in the red (good time to buy :P), I am still confident in my investment opportunity while being unemotional towards its placement.

And that’s why I invested in cryptocurrencies, without being an ounce of an expert.

But, at the end of the day, you have your own decisions that you will go through before investing in any form of assets. For me, once I realised I wanted to enter a market, I had to find someone I can trust to help me enter easily, who knows more about the sector than I do and can help to reduce some of the risks. Invsta fit this profile nicely.

However, if you are the type that loves to play the trading game, then other decisions may drive you. Another great thing about the available opportunities out there.

In either case, please remember that these assets are high risk, so invest wisely.

The fun disclaimer:

Joel Smith is an employee of Invsta. All opinions expressed in this article are personal views based on individual experiences and should not be considered as investment advice.

This publication is provided by Invsta in good faith for general information purposes only. Information has been prepared from sources believed to be reliable and accurate at the time of publication, but this is not guaranteed. Information, analysis or views contained herein reflect a judgement at the date of publication and are subject to change without notice. This is not intended to constitute advice to any person. This does not constitute advice of a legal, accounting, tax or other nature to any persons. You should consult your tax adviser in order to understand the impact of investment decisions on your tax position. Past performance is not indicative of future results, and no representation or warranty, express or implied, is made regarding future performance. Cryptocurrencies are a highly volatile, high risk investment in which the value can change significantly. Before making any investment you should consider your own risk tolerance level and personal financial situation.

Originally published at blog.invsta.com on June 19, 2018.