A cryptocurrency boss has given his three top tips for investing in the likes of Bitcoin.
Since early April, Bitcoin has dived from $80,000 to $50,000 now, losing value as the Australian share market this week hit record highs.
Little more than a year ago, one Bitcoin was worth just $13,000.
It surged during the pandemic and peaked as American billionaire Elon Musk flip-flopped on accepting the cryptocurrency as payment for his Telsa electric cars – citing environmental concerns about high-powered computers.
Jeremy Ng, the Singapore-based Asia-Pacific managing director of cryptocurrency trading platform Gemini Trust, said volatility was to be expected considering this type of asset had only been around for 13 years.
‘We should take a step back and realise that cryptocurrencies as an asset class is still relatively young,’ he told Daily Mail Australia.
‘Like any asset class when they’re maturing, the volatility will also slowly decrease.’
A cryptocurrency boss has given his three top tips for investing in the likes of Bitcoin. Since early April, Bitcoin has dived from $80,000 to $50,000 now, losing value as the Australian share market this week hit record highs
Bitcoin, created in 2008 as a store of value, has a market capitalization of less than $900million, compared with $14.5trillion for gold.
But Mr Ng predicted Bitcoin as the dominant cryptocurrency would one day surpass gold as institutional investors like big companies dominated the sector instead of individuals trying to get rich quickly.
‘Gold started as a medium of exchange but nobody’s using gold as a medium of exchange anymore,’ he said.
‘It has become a store of value, that’s how I look at Bitcoin as well.
‘It was built to be a form of transaction but as it evolved, there’s a stronger characteristic Bitcoin is like gold to become a store of value.’
Little more than a year ago, one Bitcoin was worth just $13,000. Jeremy Ng, the Singapore-based Asia-Pacific managing director of cryptocurrency trading platform Gemini Trust, said volatility was to be expected considering this type of asset had only been around for 13 years
Cryptocurrencies are also following a similar trajectory to early online sales giants like Amazon during the early 1990s.
‘This is like investing in the internet in the early 90s,’ Mr Ng said.
‘That is exactly how we look at cryptocurrencies: it is the new internet, it is Web 3.0.’
Invest over four years
Mr Ng said cryptocurrency needed to be considered as a longer-term investment, advising market players to have a four-year strategy.
‘Take a long-term view and see it grow over time,’ he said.
During the past decade, despite the volatility, cryptocurrencies have delivered average annual returns of 20 percent, more than double the 9 percent gain for shares.
‘While Bitcoin is more volatile than equities or bonds, but the return is also higher,’ Mr Ng said.
‘It gives you a very different perspective on how to look at this asset class.’
Only dedicate 3 percent of your portfolio to cryptocurrencies
Someone investing $10,000 is advised to only dedicate 3 percent of that to cryptocurrencies, which works out at $300.
Someone investing $10,000 is advised to only dedicate 3 percent of that to cryptocurrencies, which works out at $300. While Bitcoin is a store of value, Ethereum is a new benchmark alternative to business banking, known as decentralized financing
‘Don’t invest more than you can lose,’ Mr Ng said.
‘Start small: start with say 3 percent to 5 percent allocation.
‘As you learn more, then you can slowly increase it to 5 percent to 10 percent.
‘The key is really, don’t look at it as get rich fast.’
Invest in cryptocurrencies with a specific purpose
While Bitcoin is a store of value, Ethereum is a new benchmark alternative to business banking, known as decentralized financing.
‘Not all cryptocurrencies are the same. They’re not all created the same,’ Mr Ng said.
More than 700 different types of cryptocurrencies are in existence but not all of them are going to dominate the market if they lack a specific purpose.
‘There are a lot of these coins that you and I have not even heard of before,’ Mr Ng said.
‘Just like companies, not every single one is going to survive in the long term.’