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You’ll be forgiven for thinking Crypto has gone out of fashion recently. Bitcoin and Ether – the two most popular digital assets – have lost more than HALF their value since the year began.
So with investors seemingly losing the appetite for cryptoassets, is now a good time to get involved? Or is it best to give digital coins a swerve? Continue reading for all the details or click on a link to head straight to a section…
Crypto is online, virtual assets. Bitcoin is the most well-known and was founded in 2009 by a mysterious individual known as Satoshi Nakamoto.
Holders of bitcoin can either spend it, sell it, or hold on to it, with the hope its value will increase.
For the tech geeks out there, bitcoin uses as an ‘accounting ledger’ which is used to securely record all digital transactions. This is known as a blockchain.
Bitcoin isn’t the only cryptoasset of course. Other popular ‘alt coins’ include Ether (aka Ethereum), Solana, Avalanche, Binance Coin, Cardona, Dogecoin, and Polkadot. There are many more.
Most cryptoassets are decentralised. This is arguably one of the biggest selling points of crypto as it means that no individual, company or ‘central bank’ has the power to control supply.
Bitcoin was the world’s first decentralised cryptoasset. There can only ever be 21 million bitcoins ever in existence and 19 million are already in digital wallets. The remaining 2 million bitcoins will eventually be ‘mined’ into circulation. After that, that’s it – there won’t be any more of them!
This isn’t the case with traditional fiat currency of course, where money can be created or destroyed.
The Bank of England, for example, can easily manipulate the value of the pound. It can do this as it has the power to create money out of thin air through a process known as ‘quantitative easing.’ While this process can help to support a failing economy, it can also devalue currency and spark inflation.
Crypto is a highly volatile asset and unregulated. When it comes to crypto trading, double-digit gains one week, followed by double-digit losses the next is nothing out of the ordinary.
Let’s take a look at how two of the most well-known cryptoassets, Bitcoin and Ether, have performed so far this year (If you’re a holder – or ‘hodler’ – or either, you may wish to look away now)!
On New Year’s Day you’d have to part with £35,000 if you wanted to get your hands on a single bitcoin.
Fast forward 11 months and one bitcoin now costs £15,000. This translates to a 62% fall since the year began (5-year performance: -4.5% as of 6/12/22).
While Bitcoin witnessed various ups and downs during the first quarter of 2022, its value has been on a downward trajectory since late March.
Ether, commonly referred to as ‘Ethereum,’ is another cryptoasset that has had a year to forget. Its price has fallen from £2,784 to £1,131, as of the afternoon of November 10 2022. That’s a 59% fall (5-year performance: 189% as of 6/12/22).
While Ether’s price climbed briefly to £2,800 in early January, its value has flopped throughout 2022.
Early summer proved to be particularly bad period for the world’s second-largest cryptoasset. Ether went from £2,800 in early May to just £990 by mid-June.
“Be fearful when others are greedy, and greedy when others are fearful.” It’s one of legendary investor Warren Buffet’s most famous quotes. And it’s fair to say that investors certainty are fearful about cryptoassets right now.
Of course, 2022 has been unkind to numerous asset classes – stocks, shares, bonds…. you name it. However, a 50%+ hammering for the two biggest cryptos shows many investors are now running scared.
Yet as many day traders will tell you, an asset class that has fallen sharply may provide an opportunity to buy at a knock-down price (in the hope that the price does eventually recover in the future).
Given the difficult year for cryptoassets, you may be inclined to add digital coins to your portfolio – if only for the purposes of diversification.
If you do decide to buy crypto now it could turn out to be a shrewd move. For example, if recent falls in bitcoin and other cryptoassets are nothing more than a temporary blip, it’s possible we could see values return to previous highs in the near future. On the flip side, it is of course always possible the opposite could also happen.
While hefty returns are possible, there are no guarantees that the value of individual cryptoasset will increase in the future – never mind return to previous highs. In fact, there’s a chance cryptos could actually become worthless.
So if you choose to buy crypto, there’s always a chance things could go pear-shaped and you could lose all your investment. That being said, if you only invest what you can afford to lose, then it’s less likely you’ll be too cross with your future self if your investment does turn sour.
On a similar note, if you wish to buy a small amount of altcoins with the hope that they might be the next ‘big thing’, then it may be less likely you’ll be too upset if they do happen to lose all their value.
Some cryptos, such as Bitcoin, can be ‘mined’ through the power of computers solving complex equations. Yet when it comes to Bitcoin, mining is now a far less common than it once was. This is mainly because of the sheer computing power needed to find the remaining coins.
Instead, if you want to get your hands on bitcoin, or other cryptoassets, it’s probably best to use a reputable platform.
Simply visit the eToro website, and enter and verify your email address. You’ll then need to provide some personal details, such as your name and physical address, and investing experience. You’re also asked about your investing style, attitude to risk, and the reason why you plan to invest.
Once you’ve done all of the above you’ll need to confirm your phone number and tax residency. When complete, you’ll be able to deposit funds and invest in your chosen cryptoasset.
To buy a particular crypto, you can search for it at the top of eToro’s investing page.
If you aren’t looking to buy bitcoin, then you needn’t be concerned about not being able to find your chosen alt coin. With eToro you can invest in Ethereum, Litecoin, Dash, NEO, EOS, Cardano, IOTA, Zcash, Dogecoin, Polygon, Shiba and many more – see the eToro website for a full list.
While eToro is sponsoring this article, here at Money Magpie we’re big fans of the platform. Not only are eToro’s fees competitive, but we like the fact the platform gives investors useful insights, such as the ability to follow the trends of each coin, as well as access to eToro’s latest crypto market research & news.
We also like eToro’s $100,000 ‘virtual portfolio’ which allows newbies to get to grips with the platform before investing for real.
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MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.
This communication is for information and education purposes only and should not be taken as investment advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without taking into account any particular recipient’s investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.
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