Today, it seems like cryptocurrencies are at the heart of many of financial news stories, and for good reason. New types of crypto emerge every day, and alongside the volatility of the market and the promising future of blockchain technology, it is easy to get bogged down in the complexities.
During a webinar entitled “Mastering the basics of cryptocurrency” this week, Sean Sanders, founder, and CEO of investment platform Revix, helped to clear the fog, and introduce users to this exciting world of investments.
Watch the webinar above
Sanders said “digital assets” is an encompassing term for cryptocurrencies, stablecoins, non-fungible tokens (NFTs), security tokens, commodity-backed tokens and three or four other categories that could be classified under the digital asset umbrella.
High rewards, plenty of risk
Speaking of the risks and rewards involved with investing in crypto, Sanders cited price volatility as the most obvious. “This is all investing spaces, not just crypto, but because the crypto market is such a nascent market, there is a lot of retail investor involvement.”
Concurrently, there’s a lot of leverage in the crypto space. “This entire industry was built with trading platforms, so there is a gambling-esque sort of mentality. The price moves can be steep and extreme, definitely more so than can be seen in the stock markets.”
However, from a potential reward standpoint, the crypto space is undeniably the top-performing asset class over the last decade. “There has not been an asset class that went from being worth less than US$100-million in 2012 to $1.2-trillion today. That’s an incredible annualised return.”
Lack of regulation
According to Sanders, unlike stock exchanges, the crypto space hasn’t been regulated, or had a high level of custody requirements in place.
“It is for this reason that we’ve seen the mismanagement of keys across crypto exchanges worldwide. Every week you hear about a new crypto platform that’s gone bust, but this is just poor risk and financial management.”
Sanders said this is why one of the big things that Revix has been calling for in the space for a long time is regulation. “We need regulation to develop, and for consumers to be protected, and want to be at the forefront of that. We have both category-1 and category-2 financial services provider licences, meaning we are able to offer crypto products as well as traditional investment products in South Africa. We’ll be first in the queue when we can apply for a crypto asset servicing licence, as we want to have diversified, more responsible investing products and do right by our consumers by offering a more secure investment platform.”
No more intermediaries
Another compelling benefit of digital assets, Sanders said, is that they sit on a blockchain. A blockchain is an online distributed ledger or decentralised network of nodes that can independently verify transactions. This removes the need for intermediaries in financial transactions because it enables a transparent system of recording and verifying transactions.
He said if one looks at the payment space, there are banks, card providers and acquirers, all of whom take a little fee when a transaction occurs. With a credit card transaction, the best case scenario is 1.5-2%, but usually 3.5-4%, for a payment.
“With digital assets, it’s just digital information being transferred from one party to another. In the future, our kids will laugh at the fact that we had to pay so much for digital transactions; it’s almost like paying for an e-mail, why would you do that?”
Building trust
Digital assets also help to build trust. These intermediaries can be vulnerable to security breaches, hacking, fraud or corruption.
With blockchain, each transaction is recorded on a block that is cryptographically linked to the previous block, forming an unalterable chain of blocks — making it nearly impossible to tamper with the records or alter them retrospectively.
Since transactions on a blockchain are verified by a network of participants rather than a central authority, there is no need for intermediaries to act as trusted third parties. This eliminates the risk of fraud and speeds up transaction times.
Manage your own wealth
Similarly, dipping your toes into the cryptocurrency waters can be very simple. Sanders said Revix’s aim is to enable everyday people to do exactly this, and to easily grow and manage their own wealth.
“We don’t think everyone needs a financial advisor in order to invest and save and properly manage their money. With Revix it’s easy. Users can simply sign up for an account, which takes a couple of minutes to verify and Fica, and start investing.”
He stressed that Revix isn’t aimed at traders but rather long-term investing. “We believe the most long-term value in the digital asset space comes from buying and holding. The data that we have supports this.”
This might seem boring because people in the crypto space want excitement and volatility. “However, a ‘Red Bull’ approach to investing isn’t necessarily the right way,” he stressed.
Diversify and do due diligence
Sanders also offered advice to anyone looking to invest in this space. “Number one, look at the platform that you are engaging with. The directors and where they are located should be disclosed. Next, scrutinise the platform’s management team and their backgrounds. Contact the customer support team and ask them the hard questions around custody and security protocols.
“Don’t deposit a large amount of money with an unknown crypto provider. Test the waters with a small payment. Doing this due diligence is all worth it in the end.”
Finally, understand that there are high risks. “Diversify, and not just in the digital asset space, but across asset classes. Invest in crypto, stocks and real estate, and try to build a diversified portfolio. It might seem boring financial advice, but that’s the approach that I would take. There’s never a dull day in the world of crypto. All I can say is watch this space there’s a lot more to come.”
Disclaimer
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary. Remember, investing in cryptocurrencies is considered a high risk investment meaning you can lose money when investing. For more information, please visit www.revix.com.
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