Seven things you need to know about investing in crypto
Bitcoin is soaring, having climbed from $20,000 in November 2020 to reach $74,000 in March 2021. It is creating opportunities for spectacular gains, and if you are still sitting on the sidelines and have not yet invested, here are seven key points to help you get started.
1. Crypto markets are very accessible
You don't need to be wealthy or a tech guru to trade cryptocurrencies. In fact, according to Australian FinTech, one in five Australians now own some form of cryptocurrency, which highlights how digital currency trading has become mainstream.
2. Investment giants are getting onboard
A further sign of the widespread adoption of cryptocurrency investing is increased interest from investment giants such as the world's largest asset manager, BlackRock, which has recently added Bitcoin futures as a potential investment for two of its funds.
This global expansion increases Australian confidence in the legitimacy and investment potential of cryptocurrencies as an asset class.
3. You don't need a lot to get started
A full Bitcoin may be priced at, say $61,000, however, you do not have to purchase one whole Bitcoin; you can purchase a fraction of Bitcoin (or any digital currency) from as little as $1. This means you can still benefit from the upswings in value without having to invest your life savings. One potential strategy worth considering is to dollar cost average into the market by setting up automatic recurring deposits of, say, $100 a week into Bitcoin, and slowly building your portfolio. Dollar-cost averaging helps reduce risk by entering a market gradually over time at different price points instead of one big lump sum which averages the price bought into the asset.
4. Get into the market in minutes
Traders can deposit fiat currency (government-issued currencies such as AUD and USD) into exchange platforms and start trading crypto in a matter of minutes. When you're ready to pull funds back out, digital currency can be converted back to fiat money and accessed instantly via the OSKO and PayID network. With traditional brokerages, this would typically settle funds into an account over a three- to five-day period, however, some cryptocurrency industry vendors have introduced faster and almost instant options to get your money in and out of the platform.
5. There are features to minimise risk
When trading cryptocurrencies, many exchange platforms have features called stop and limit orders which are a price-triggered, automatic buy and sell order. This feature is especially useful as a safety net for those new to the market as it can help minimise losses and maximise wins.
For example, if you invest $500 into a coin, using this feature you can set up a sell order that will sell your asset if the price drops below $450, which means if your asset drops in value, the most you can lose out of your initial investment is only $50. Equally, if an asset is going up in value, you can create a sell order which will sell the asset if it hits a certain price, making sure it sells before it drops in value and therefore increasing your chances of profit.
6. It makes sense to try before you buy
A simple way to build confidence as a new investor is to look for a broker that provides demo accounts. By using a demo account, you can learn how to trade with zero financial risk by mock trading in real time with real market data and fake money. If you are new to trading crypto, this is a must. Investing in crypto can be daunting for those new to the industry with the fear of financial loss preventing them from taking the plunge. Demo modes are a fantastic way to test the waters, learn the market and practice trading before jumping in with real money.
7. Look for a broker offering genuine support
Starting out in new markets can be less stressful when you know a real person is available to provide support. It's more helpful than chatbots, and far quicker than trawling for answers on online forums.
Some brokers have customer support but some also give traders access to a dedicated account manager. You may never need to call on this level of support, but it's definitely a feature to look for.