Crypto investment 101
You need the right tools and information to navigate through your newly discovered planet. In this write-up, you will be provided with information on how to trade bitcoin, essential trading strategies to use as an edge over the market, and risk management tools. Bitcoin trading is a goldmine for most people since its introduction to the financial world. In a nutshell, bitcoin trading involves the speculation of the price movement of a cryptocurrency or asset. In other words, you are anticipating bitcoin price to move in a particular direction.
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- Adulting 101: I got burnt by a crypto boom as a student. It taught me to plan before investing
- Tectonic Crypto: A Price Prediction for TONIC in 2022
- Diversified Cryptocurrency Investments
- How to start investing in cryptocurrency: A guide for beginners
- Millennials want in on the cryptocurrency hype. But here are three things to do before you invest
- Crypto Investing 101 and Things to Consider For Bitcoin and Ethereum
- How To Start Investing In Cryptocurrency In Six Easy Steps
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The cryptocurrency, or crypto, world has evolved dramatically since an anonymous author or authors, writing under the pseudonym Satoshi Nakamoto, published a brief white paper in detailing the mechanics of what would become known as bitcoin. While bitcoin is still the largest crypto by market capitalization, there are now some 6, cryptos in existence.
For many, the crypto universe has developed beyond its origins as a new payment technology into an investment opportunity. Such impressive performance has naturally increased investor interest. So while many investors may insist that this time really is different, given the extreme volatility and uncertainty in determining appropriate valuations, we still see bitcoin and other cryptos as speculative investments and not suitable for all investors.
Therefore, our aim here is to arm investors with knowledge of the crypto landscape and equip them with the tools to evaluate the myriad crypto options out there.
Crypto discussions often ignore the increasing adoption of blockchain technology. Blockchain not only makes crypto possible, but also enables the broader movement towards decentralized finance DeFi , the secular force that we think is driving the advent of digital currencies. If crypto is to be taken seriously as an asset class and not just a means to speculate on digital art or sports videos, we believe investors should focus on opportunities within DeFi alongside bitcoin.
Learning the technological concepts behind crypto can feel like stumbling into an upside-down world of make believe. The concept of decentralization is a key differentiator between logging information on a common spreadsheet versus enabling the unique, complex features of crypto. In a decentralized computer network, data is not stored in a central location, and has no central point of control.
Any user can tap into the network anywhere, at any time. The idea is similar to Linux open source software or Wikipedia. The word blockchain did not appear in the original bitcoin white paper. However, the blockchain concept soon formed the technological backbone of how digital assets work. What is blockchain? It is a technology that consists of complex cryptography and software that creates an immutable, decentralized database for whatever its application may be. The data stored on the blockchain cannot be changed, and there is no central authority over the records.
The blockchain concept dates back to the early s and the early days of Web 1. Why is blockchain technology essential to crypto?
Because blockchain cryptography supports a decentralized and unalterable ledger, once a cryptocurrency transaction is recorded, it cannot be erased. This provides a strong defense against potential double spending. These building blocks pun intended describe the what behind blockchain. But who keeps the decentralized network operational? Since no one is in charge per se, the decentralized system incentivizes users to self-regulate.
To assess the strength of this soft infrastructure, investors should apply a common technology industry measure: network effects. Among similar applications, better scalability and stronger network effects determined which would prevail. We believe these concepts form the bedrock of crypto fundamental analysis. Without a committed community of miners and node operators validating transactions, a blockchain network could fall prey to theft or fraud, which could render the cryptocurrency worthless.
In fact, a critical differentiator among cryptocurrencies is the perceived strength of their network effect. Therefore, when it comes to the underlying network strength of a blockchain, crypto investors should know what they own. Prices might be rising in the short term, while network activity — the most basic value in crypto — is flashing warnings signs of long-term instability.
So how do we evaluate cryptocurrencies throughout our investment process? Given the short time crypto has existed, can we even implement our traditional investment analysis process? In our view, absolutely. Admittedly, some of the approaches may seem unorthodox — our sympathies to students of The Intelligent Investor — but this is the upside-down world of crypto. The business cycle has four phases in our traditional investment analysis: slowing expansion, contraction, recovery, and accelerating expansion.
How does this apply to crypto? Instead of GDP growth, industrial production, retail sales, and similar metrics, the crypto business cycle is centered on the all-important network effect.
Since anyone can observe all transactions on a decentralized blockchain, investors can analyze how long users are holding onto their coins, which is analogous to stock turnover. The next stage is defined by long-term investors, and the final stage by speculative short-term traders.
The increasing influence of speculators tends to signal a weakening network wherein longer-term investors — and potentially miners or node operators — have left for better opportunities elsewhere. This is why network effects are critical to a decentralized blockchain for investors: Growth in the number of long-term users strengthens the network, which should help maintain its value over time.
While crypto follows a business cycle just like any other investment, the available metrics are coincident indicators at best. However, the chart below demonstrates that a relatively strong group of long-term investors maintain most of the bitcoin network. Can an asset that derives value from a network effect really have quantifiable value? The volatility of crypto markets makes technical analysis challenging.
Furthermore, in the crypto space, what traditional technical analysis might interpret as a sell signal can often be an uptrend confirmation and vice versa. The crypto community coined the acronym HODL to describe the rollercoaster of crypto prices.
Buy-and-hold HODLers have come to expect high volatility as par for the course. Which is why it is not an appropriate investment for all.
The following table outlines some technical measures that examine transaction activity as a momentum indicator. With that framework or lens through which to view crypto as a traditional investment process, what are the key merits and risks of investing in the asset class? It is difficult to dismiss digital assets as a flash in the pan. We believe if the internet evolves to Web 3.
The mainstream narrative may continue to focus on bitcoin because digital gold is easier to explain than a decentralized flash loan smart contract. As NFTs like digital art grow in popularity and users become accustomed to how DeFi works, we expect the use cases for decentralized blockchain technology to continue expanding rapidly.
Yet the real-time pricing of these venture-capital-like assets could lead to significant performance volatility, which, again, is why digital assets are just not suitable for all investors. Our goal was to take readers and maybe some new HODLers? Lindy Effect theory holds that the longer a technology stays in use, the longer its life cycle is extended.
For definitions of indexes used in this publication, please refer to pnc. PNC does not provide legal, tax, or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax services agreement. Investments in cryptocurrencies or digital assets are speculative investments that involve high degrees of risk, including a partial or total loss of invested funds.
Investments in this area are not suitable for any investor that cannot afford loss of the entire investment. Accordingly, digital assets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. Investors should conduct extensive research into the legitimacy of each individual digital asset before investing.
The features, functions, characteristics, operation, use and other properties of the specific digital asset may be complex, technical, or difficult to understand or evaluate. Blockchain is a nascent and rapidly changing technology and there remains relatively small use of blockchain networks and blockchain assets. The development of blockchain networks is a new and rapidly evolving industry that is subject to a high degree of uncertainty. Factors affecting the further development of the blockchain industry include: continued worldwide growth in the adoption and use of blockchain networks and assets; the maintenance and development of the open-source software protocol of blockchain networks; changes in consumer demographics and public tastes and preferences; the popularity or acceptance of the Bitcoin or Ethereum networks; the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; government and quasi-government regulation of blockchain networks and assets, including any restrictions on access, operation and use of blockchain networks and assets.
The application of distributed ledger technology is novel and untested and may contain inherent flaws or limitations. Blockchain is an emerging technology that offers new capabilities which are not fully proven in use. There are limited examples of the application of distributed ledger technology. The creation and operation of digital platforms for the public trading of blockchain assets will be subject to potential technical, legal and regulatory constraints. No Bank Guarantee. May Lose Value.
All posts are the opinion of the author. CFA Institute members are empowered to self-determine and self-report professional learning PL credits earned, including content on Enterprising Investor. Members can record credits easily using their online PL tracker. Her career began with investment banking, advisory, and equity research positions with Legg Mason and then with PNC. In addition, he leads the team that establishes overall strategic and tactical asset allocation guidance of client portfolios, manages the evolution of the investment processes, provides thought leadership on key investment issues, and is the author of numerous publications.
Prior to joining PNC, Brady was a consultant at Clearstead, providing institutional investment advice to endowments, foundations, and retirement plans. Before his time at Clearstead, he was a Senior Portfolio Associate at the Glenmede Trust Company where he assisted portfolio managers in a holistic approach to wealth management and financial planning. Brady graduated with a bachelor of arts in economics from The Ohio State University. He is very active in his community and is a member of the Society of American Baseball Research.
Rebekah M. McCahan is an investment and portfolio strategist for the Investment Strategy team. She is responsible for investigating high-potential investment opportunities and conducting research that supports PNC's overall investment recommendations and asset allocation processes. McCahan collaborates with risk, compliance, and portfolio management teams to ensure a professional level of risk management and compliance oversight to the investment process.
She is secretary of multiple investment policy and portfolio construction committees, responsible for collaborating with the committee chairs to maintain regulatory and fiduciary responsibilities. She has 40 years of financial industry experience, where she has held several positions, including economist, economic analyst, and investment strategist creating models and conducting macro research and analysis for publications and presentations.
Before joining PNC, she was a statistician with Scudder Funds, managing the statistics both internally and externally including the prospectuses and multiple trade publications for all Scudder mutual funds.
McCahan graduated with a bachelor of arts in mathematics from Wittenberg University. Moloznik is responsible for multi-asset class strategy and analysis, including equity, fixed income, and alternative asset classes.
Additionally, he co-authors numerous thought leadership publications and delivers presentations on these and other ad hoc topics. Moloznik graduated with a bachelor of science in business administration from The University of Delaware. John Moore is an investment and portfolio strategist for the Investment Strategy team.
He is responsible for investigating high-potential investment opportunities and conducting research that supports PNC's overall investment recommendations and asset allocation processes.
Adulting 101: I got burnt by a crypto boom as a student. It taught me to plan before investing
A new cryptocurrency-related scam is abusing the Amazon brand to dupe would-be investors into handing over Bitcoin BTC. Cryptocurrency What every business needs to know. Read More. Cryptocurrency and digital token scams have become a common threat facing investors and the general public today. Even though regulators worldwide are clamping down on fraud -- through tax legislation, securities offering registration, tighter rules surrounding cryptocurrency adverts, and by keeping a close eye on initial coin offerings ICOs , exit scams, rug pulls, and theft is still rampant.
Tectonic Crypto: A Price Prediction for TONIC in 2022
And the bigger question is this: should you be investing your hard-earned money in it? Thoughts and strategies about cryptocurrency spread fast. This is because cryptocurrency is a complicated and unique technology that is also accessible. It can be understood by anyone, regardless of background. Maybe you have had it recently with cryptocurrency being a focal point of the news and online conversation. Only after you understand these basics can you make a decision on whether or not it is right for your investment needs. There was speculation, but no real answer. Unlike stocks , bonds, artwork, real estate, or precious metals , cryptocurrencies have no use or value outside of possession. Gold is a vital component in electronics, and jewelry — and thus has value outside of its limited supply.
Diversified Cryptocurrency Investments
Everyone has heard about Bitcoin by now that you can easily sell bitcoin in Dubai. It introduced the world to blockchain or distributed ledger technology, and it is the centre of the universe as a crypto asset. However, bitcoin is far from alone. In fact, an entire galaxy of crypto assets has been built to enable a diverse set of use cases and applications in industries like identity management, data storage, gaming, finance, lending, social media, and streaming.
How to start investing in cryptocurrency: A guide for beginners
Investing in these alternative currencies can surely bring you a lot of fortune. Their widespread popularity also ensures that there is no shortage of crypto exchange platforms for you to choose from. Ideally, a great crypto platform will offer a quick account setup, low transaction fee, easy payment methods, and similar features to make the investment process seamless and hassle-free. How do you choose the right crypto platform to invest on? Once you select a platform, how do you start investing? This exhaustive guide will walk you through a round-up of the top 5 best cryptocurrency platforms to help you get started with investing.
Millennials want in on the cryptocurrency hype. But here are three things to do before you invest
It includes everything about the mechanics of how the asset works, as well as the psychological or behavioral forces that could affect its value long term. Projects with poor tokenomics are doomed to failure, as people rapidly sell the tokens at the first sign of trouble. As in normal economics, the two forces we are most interested in are Supply and Demand. Understanding how those are baked into the tokenomics give us a good sense of how desirable a given token or cryptocurrency should be. Based on supply alone, should I expect this token to hold or increase its value? Or will that value be inflated away? On the supply side, a token will increase in value if fewer of those tokens exist—we call that deflation. Roughly 19,, already exist, so there are only 2,, more to be released over the next years.
Crypto Investing 101 and Things to Consider For Bitcoin and Ethereum
Home » Guides » Blockchain Matthew Baggetta. Cryptocurrencies are seeing a massive surge in popularity. While they used to attract a very niche audience just a few years ago, today, everyone and their grandmother wants to learn how to invest.
How To Start Investing In Cryptocurrency In Six Easy Steps
RELATED VIDEO: How to Invest for Beginners (2021)Want to stay in the know about the cryptocurrency industry? Checkout our free newsletter for market updates, exclusive content and educational videos! Our guide starts from square 1, so no prior experience is necessary to benefit from our guide. With volatile prices, complex user-interfaces and buzzwords everywhere, the blockchain industry can be intimidating. Our goal with Crypto is to teach you how to utilize the capabilities of blockchain technology as a financial instrument, diving deeper than just buying and holding digital assets on an exchange.
The cryptocurrency, or crypto, world has evolved dramatically since an anonymous author or authors, writing under the pseudonym Satoshi Nakamoto, published a brief white paper in detailing the mechanics of what would become known as bitcoin. While bitcoin is still the largest crypto by market capitalization, there are now some 6, cryptos in existence. For many, the crypto universe has developed beyond its origins as a new payment technology into an investment opportunity. Such impressive performance has naturally increased investor interest. So while many investors may insist that this time really is different, given the extreme volatility and uncertainty in determining appropriate valuations, we still see bitcoin and other cryptos as speculative investments and not suitable for all investors. Therefore, our aim here is to arm investors with knowledge of the crypto landscape and equip them with the tools to evaluate the myriad crypto options out there.
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