On the Globes Investment Supplement
Stocks, commodities or real estate – where to put the money while the markets are shaking. Globes reporters and experts analyze various aspects of the investment world with inflation, war, epidemic and supply chain damage in the background
The crypto market is not immune from the turmoil in the markets. The leading currencies have been cut by tens of percent since the beginning of the year, with the most prominent being the major currencies, Bitcoin and Ethereum, which have lost tens of percent of their value. And there are also those who snatched stronger.
For veteran crypto investors, a 50% drop from the peak is not something they have not seen in the past, and probably not something they will not see in the future. In the past year, the crypto worlds have attracted a lot of mainstream investors, who have been blinded by stories of rapid enrichment, while looking for the next currency that is expected to explode. The Tara Luna coin was one of the big stars for them, and then it collapsed and put the entire market in a spin. What should you know if you are thinking of entering the market during a period of upheaval?
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Technology: How it works
Although digital currencies are called currencies, a significant proportion of them are more similar to the securities of young technology companies. Coins are part of crypto technology – that is, a way of recording transactions transparently on the blockchain network.
Behind all the development of crypto there is an ideology that believes in decentralization. That is, the decisions are not made by stakeholders, but by the community that holds the coins. Bitcoin is actually a project to create money that does not depend on banks.
The digital currencies can be divided into five: 1. DEFI – the decentralized world of finance. In this world it is possible to invest in loans, deposits, and currencies of project developers; 2. Gaming and Towers – The projects in the field create an infrastructure for the world in which we will operate through digital identity; 3. NFT – a world where the advantages of blockchain technology is the ability to produce one-value ownership of digital assets, which is mainly expressed in the worlds of collecting and art; 4. Money – transferring value completely. In this area are Bitcoin and currencies whose exchange rate is linked to the Fiat currency (dollars, euros, etc.); 5. Shitcoins – Coins that were issued as a joke, but became a hit among investors. Prominent among them is the dogecoin, Elon Musk’s favorite currency.
Investment: How to get in and what to watch out for
An investment in crypto is a high-risk investment, and that is how it should be treated. It is very volatile, falls of 50% in the value of the investment in a short period of time are not unusual, and there are also losses due to stings and cyber attacks. Today the crypto market moves in high correlation with the stock markets, only with higher volatility. That is, when planning an overall investment portfolio, according to the investment objectives, and investment ranges, the crypto is an addition to the risky part, but it does not constitute a diversification from the capital market risks.
The high volatility in crypto requires thinking not only about profit but also about loss. Do not invest money that you are not conceptually ready to lose, and do not enter the field if you do not have iron nerves.
Do not invest an amount that you are not conceptually willing to lose / Photo: Shutterstock
Teach the projects in which you are investing. What is etherium? What are its advantages and disadvantages? Be suspicious of coins that you do not fully understand how they work, especially those that ride a wave of popularity. For example: the squid game coin that was discovered to be a scam.
Finally, plan your investment range. If it is a short-term investment of money, it is not at all certain that crypto is the right investment. If it is a long-term investment, then among crypto investors the word is known – HOLD – to continue to hold. That is: the big profit from crypto is from choosing an investment strategy and long-term maintenance in it.
Highlights: Wallet and taxation
Purse: Investing in crypto can be done in three ways – keeping the coins in a hot wallet, ie a wallet that is a technological means of keeping coins safe and connected to the network; Maintenance in a cold wallet, i.e. in a wallet disconnected from the network; And keeping the coins at a broker. Each way has advantages and disadvantages, you need to know the wallets, understand the keys and ways to recover the code, understand whether it is more suitable for the nature of your trade. A hot wallet is constantly connected but exposed to cyber attacks, Will be kept by a third party.
The financial system: The financial system raises difficulties in accepting money originating from crypto, for fear of money laundering. Banks require the ability to track the path of money – that is, where the money has been at any given point in time.
Where to buy and what is the fee: Crypto can be purchased on local exchanges, international exchanges, or directly from private individuals. In local stock exchanges it is possible to invest mainly in Bitcoin or Etherium and in international stock exchanges the supply is wider. The purchase can be made by bank transfer or credit card. In any such purchase try to understand the purchase fees and exchange rates of the currencies.
Crypto Buying Stand in Oregon, USA / Photo: Shutterstock, Tada Images
taxation: The profits in the crypto are subject to capital gains tax, and the crypto investors who realize profits or losses must report to the income tax. Unlike investing in securities where the tax deduction is originally made, here the responsibility for reporting and paying taxes lies with the investor.
Tracking devices: It is possible to enter the world of crypto even without purchasing currency, by investing in traditional capital market instruments – shares of mining or crypto companies, which track futures contracts in the field.