The team at Revix unpacks some more facts and myths around cryptocurrencies, including whether now is, or is not, a safe time to invest.
1. It is a safe time to invest in crypto right now, even with the market fluctuations — Myth/fact
Safety in investing is a subjective matter. Individuals have very different risk tolerances to investing. Some people want a stable, cash-generative investment; others want some risk (what we know as volatility), and because of that risk they get compensated with reward.
Advice for investing in crypto should be the same advice given to anyone looking to invest in any new asset class, be that a new property fund, equities or even crypto.
The fundamental rules of investing still apply: Don’t invest if you are looking to get rich quick and don’t put in more money than you can afford to lose.
Some people might want to put 20%, 50% or even 70% of their investable wealth into this asset because they unequivocally believe in it. Whether you do or don’t, you can’t predict the future, and whoever tells you they know where any market is going is lying to you. So, be smart and invest the amount that works for you. That might be as little as 1%, and that’s perfectly fine.
It’s all about time in the market and not about timing the market.
Unless you are an experienced trader (and even they get it wrong), most who try to time the market usually get hurt. A far better strategy is to dollar-cost average. Historically, that has been a successful investment approach with cryptos.
2. I will become a millionaire within a week investing in crypto — Myth/fact
Again, it all depends on your risk tolerance. If you decided to buy R500 000 worth of Cardano (ADA) and it doubled in a week, then yes, you would be a millionaire, but this comes with extreme risk as the opposite could also be true. You could buy R500 000 of ADA, and it falls 50% and you’ll have just lost R250 000 in a week.
It’s all about risk tolerance and how much you are willing to invest.
3. Bitcoin is the only and most trusted big cryptocurrency — Myth
While bitcoin is the most trusted cryptocurrency, this is largely due to its being the first cryptocurrency. Therefore, it has the most time in existence, but it is not the only cryptocurrency.
There are over 4 000 cryptocurrencies and some are catching up with bitcoin. Ether, which uses the Ethereum blockchain, is the second biggest cryptocurrency and accounts for nearly 18% of the total market.
There are many more sectors in crypto that are being built, including DeFi (decentralised finace) and smart contracts, that are catching investors eyes and growing at a rapid pace.
4. Investing in crypto, like investing in any asset, has its greatest returns over a long-term strategy — Fact
Due to bitcoin’s volatility, it’s an intense asset to throw your life savings at. But like most asset classes, it helps returns of a broader portfolio when added. Keeping in mind that regardless of the high volatility, bitcoin holders have been rewarded handsomely for it. Bitcoin is up over 220 000% in the past 10 years. That’s unlike any investment seen before.
But here’s the trick… Bitcoin has a unique ability in that it is uncorrelated to almost every other asset class out there. That gives it great diversification benefits … and, as Harry Markovitz (Nobel Prize winner in for economics) once said, “Diversification is the only true free lunch in investing.”
And that’s where bitcoin’s power lies.
It’s been found that holding around 2-5% of your investable wealth in crypto can vastly improve your return per unit of risk (Sharpe ratio) over the long term. Now, keep in mind this is still a young asset and proved back-testing will still take years as the data grows, but these are the initial findings.
Through Revix, you can also gain access to ready-made “crypto bundles”, which offer this diversification benefit. These bundles allow you to own an equally weighted basket of the world’s largest and, by default, most successful cryptocurrencies.
Revix brings simplicity, trust and great customer service to investing. Its easy-to-use online platform allows anyone securely to own the world’s top investments in just a few clicks. Revix guides new clients through the sign-up process to their first deposit and investment. Once set up, most customers manage their own portfolio, but can access support from the Revix team at any time. For more information, please visit revix.com.
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. 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.
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