Crypto investment: what's the best option for you?
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Loading... - Genevieve Allard
- 25 May 2022
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Crypto investment: what’s the best option for you?
The birth of blockchain technology and cryptocurrency has triggered a revolution in the capital markets and became one of the rising asset classes in a short period. The rises and falls in the crypto world have attracted more and more eyeballs as their popularity grows and investor interest continues to expand.
There's a growing sense that cryptocurrencies are more volatile than stocks, but that's not necessarily a bad thing. With the crypto market just entering its second decade, massive price swings are not uncommon for a relatively young asset class. This volatility may pose a risk to some investors, but that shouldn't deter them from investing in digital assets altogether.
Understandably, the interest in finding and investing in the cryptocurrency world is on a rapid rise even as Australia's first crypto ETF launch recently attracted over 3 million investments on the first day.
Crypto Economy Overview
The cryptocurrency market has had explosive growth for the past two years. Its market size has jumped from approximately $300 billion in 2020 to $2 trillion by February 2022. At its peak in October 2021, the market capitalization surpassed $3 trillion. Among thousands of cryptocurrencies today, Bitcoin was the first and remains the most widely held, accounting for over 40% of the market capitalization in 2022 while Ethereum's dominance is at 18.3%.
Why invest in Crypto?
The rise of the crypto market has ignited a new generation of investment in the capital market as a decentralized digital currency network, meaning it operates through a system of peer-to-peer transaction checks rather than a central server. When cryptocurrencies are bought and sold, the transactions are added to the blockchain: a shared digital ledger that records data through a process called ‘mining’.
High liquidity is one of the key features of crypto. As the transactions are dispersed across multiple exchanges, comparatively small trades can have huge impact on market prices. Liquidity is highly regarded by traders as it brings about better pricing, faster transaction times and increased accuracy for technical analysis.
However, this is also part of why crypto currency markets are so volatile.
In addition, the unregulated nature of cryptocurrency makes it too risky to support a full-fledged financial system. Due to the lack of government backing, the market is bearing a higher risk than other traditional asset groups.
So, what can you do?
Instead of holding a particular coin or token, there are ways of gaining access to the crypto investment opportunity. Below, we have listed three key primary options for anyone who is looking to participate in this booming investment community while staying under a safer shelter.
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Correlated Share
One of the easy ways to gain crypto exposure is by purchasing stocks that invest in crypto assets directly supporting making the blockchain network more efficient or operating in the crypto market in some capacity. Below are some popular names that are making waves in the crypto world.
- ETF (IG current product list)
As mentioned above, there are thousands of crypto on the market today. So rather than trying to pick winning crypto yourself, an ETF can expand investment exposure to a basket of coins and the underlying blockchain technology they're built on and more importantly, diverse risks.
Below are some popular crypto-related EFT:
- CFD
A CFD is a contract in which you agree to exchange the difference in the price of a cryptocurrency from when you first open your position to when you close it. You are speculating on the price of the market rather than taking ownership of the cryptocurrency. If you open a long position and the cryptocurrency increases in value, you’ll make a profit but if it falls in price then you'll make a loss. On the other hand, if you open a short position, you will only make a profit when the price drops. Read More...
