Investing In Crypto — Where to Begin?
In our last post here, I explained that most investors view cryptocurrency as an ‘alternative asset’ class. In fact, JP Morgan recently issued a report stating that crypto is now their ‘preferred alternative asset’ class along with hedge funds.
But the cryptocurrency investment space is a very broad and highly complex. There still requires a high level of knowledge and risk management, even just to use some of the interfaces required to buy, sell or hold cryptocurrencies.
Once you get to the point of deciding where to begin your crypto investment journey, be sure to join our community to learn more from our team on how-to’s like setting up your first metamask wallet.
For now, take a look at some of the high level investment strategies and where you can you start your journey.
- Buy & Hold (a.k.a. HODL)— Bitcoin remains the dominant cryptocurrency by market cap with roughly have of the total crypto market cap in Bitcoin at the time of writing. In large part, this is due to the hypothesis that it will continue to rise in value over time due to the 21 million Bitcoin supply cap. The prevailing investment thesis in the Bitcoin community is to buy and hold, or HODL (Hold On for Dear Life) over long periods of time.
The Term ‘HODL’ emerged from the Bitcoin community and due to a type-o from an early post in the Bitcointalk forum and was subsequently memed by the internet to the acronym ‘Hold On for Dear Life’.
Buy-and-Hold or ‘HODLing’ is the least time and cost-intensive investment strategy and is not limited to Bitcoin. For any cryptoasset that you believe will produce long term value, HODLing can be found as as a common rally cry during bear markets.
In order to HODL, you need to purchase the asset from an exchange or the private market and store it with a qualified custodian or in a cryptocurrency wallet that is protected by a strong password and authentication mechanism. For beginner advice on this topic, join our community! - Actively Trading — This is the idea of trying to predict price action of a specific asset or basket of assets and profit from those movements in price. Trading strategies vary in complexity and can range from futures and options trading, to market timing, to price or geographic arbitrage, and more.
There are many more and different considerations to the risk associated with active trading and it is not well suited for most investors. Certain services market themselves more specifically towards trading activity by offering lower transaction fees or other types of tools and incentives.
E-Toro is a cryptocurrency exchange targeted at beginners that famously debuted the crypto copy trading offering where any investor can setup a portfolio that mimics one of their favorite traders on the E-Toro platform. - Yield & Passive Income — This increasingly popular method of investing in the cryptocurrency space has emerged as new protocols and mechanisms have been delivered to market. This strategy alone has many options and is highly complex so I will highlight just a few of the offerings out there at a high level.
Proof-of-Stake Networks — the term ‘Staking’ refers to the ability to use cryptocurrency tokens as a means of collateral to secure a blockchain network and then earn rewards for staking, or locking up, those tokens. Every protocol has different methods, workflows, wallets, etc. in order to stake assets, but the end result is the same: earn a recurring financial return on those assets. Staking Rewards is a common resource to take an initial view of that assets in this area of the industry.
DeFi Yield — DeFi, or ‘Decentralized Finance’, is another area of cryptocurrency investment that offers very attractive recurring returns. You may have heard of Decentralized Apps (‘DApps’) like Sushiswap or Uniswap, which are two of the more popular projects. Keep in mind, though, this area of the industry is very nascent and comes with many additional risks.
NFTs — Many NFT projects have recently added features to their project that include passive income streams. Some of these methods include staking for NFTs (different from Proof of Stake), Airdrops (where an NFT holder will receive crypto assets deposited to the wallet that holds the NFT) and more. If you want to see what we have planned for The Mr. Block NFT, check it out here!
As with any of the methods described above, regulation and tax requirements are constantly evolving and must be considered as part of the investment strategy. Don’t invest anything you can’t afford to lose, have fun, good luck and be careful out there!
Please note: any guidance provided here or by Mr. Block is to serve as educational purposes only and does not constitute financial advice.
