Cryptocurrency
Have you already thought about getting into crypto mining? There are now a large number of currencies, but not all of them have a good reputation. According to a Spiegel story, well-known cryptocurrencies such as Bitcoin are only suitable for speculation and ransom payments ... Hardware specialist Roman Hartung, also known by his YouTube channel name "der8auer", is also concerned with mining. For example, he tested whether you can actually earn a lot of money with the new crypto currency Chia. In contrast to Bitcoin, for example, Chia is "embraced" with SSDs, which will hopefully not lead to a similarly absurd price increase in the future as on the graphics card market. So the resource is not computing power, but storage space. In a video series, "der8auer" had already at the start of his experiment on the question "Rich through Chia?" expressed some doubts that SSDs were not designed for the enormous write load of mining. For his test he got some used SSDs from the server area, which should withstand the load. In total, "der8auer" invested almost 6,000 euros.Recommended editorial content At this point you will find external content from [PLATTFORM]. To protect your personal data, external integrations are only displayed if you confirm this by clicking on "Load all external content": Load all external content I consent to external content being displayed to me. This means that personal data is transmitted to third-party platforms. Read more about our privacy policy . External content More on this in our data protection declaration. During his test period of six weeks, he had stolen a mere two coins. At the current rate of 356.76 euros, that's not even 750 euros - a loss, especially when prices are falling. If you stick with it and are patient, you can of course at least hope that your investment will be compensated. With a normal-sized storage tank that most people should have at home, the balance is of course even worse. An SSD with a storage capacity of 1TB takes an average of seven years to discard a coin. Apart from that, the wear and tear on the hard drives is immense. What do you think of cryptocurrencies? Have you already invested or are you not interested in the topic at all?
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What you need to know to start investing in cryptocurrency right now
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It’s been a hot year for cryptocurrencies, and 2021 isn’t even halfway over. The total value of cryptocurrencies briefly surpassed $2.5 trillion in May as a plethora of new investors jumped in, and now approximately 14% of American adults own cryptocurrencies.
Cryptocurrencies are digital assets that are exchanged online on exchanges like Coinbase (the largest U.S. crypto exchange) and Gemini or via online brokers like Robinhood and SoFi Invest. Cryptocurrencies are hardly new. Bitcoin, the first and largest cryptocurrency by market capitalization, was created in 2009 and has been followed by more than 7,700 others. You may have also heard of ethereum, tether, or even dogecoin, which began as a joke and now sits among the 10 largest cryptocurrencies.
While some people are investing purely to speculate, others look at cryptos as a way to store value or hedge against inflation. Here’s how to invest in crypto now, whether you should get into it, and what to know before you do.
How to invest in cryptocurrenciesWhile investing in cryptocurrencies has gone mainstream, it’s not an option at many traditional online brokers — yet. Here are a few brokers that allow you to directly hold cryptocurrencies alongside other assets like stocks and bonds, but fees vary and it’s key to do your homework:
TD Ameritrade, Interactive Brokers, and Charles Schwab offer bitcoin futures trading.
If your broker doesn’t offer cryptocurrencies, you might consider signing up for an account with a crypto exchange, such as one of the following:
Not all cryptocurrencies are created alike, and each token has unique characteristics that help dictate its price swings. That’s why it’s important to learn as much as possible about a specific token before investing, including why it was created (what problem it’s trying to solve) and by whom (the governance structure), recommends Chris Kuiper, vice president of equity research at CFRA Research.
“The more you understand it, the more you’re going to approach investing in the ‘right’ way,” Kuiper says. For example, he likens bitcoin to “gold 2.0” because the digital coin has a finite supply and is seen by some as a way to store value and hedge against inflation — characteristics that don’t apply to ethereum, for example. (Note that this bitcoin-is-the-new-gold take is certainly not shared by everyone, as this MarketWatch column reveals).
Cryptocurrencies fall under the umbrella of alternative assets (like commodities or real estate) because they offer a way to diversify your portfolio and have a low correlation to other assets, like stocks and bonds, Kuiper notes. But cryptocurrencies are volatile, and because trading occurs 24/7, 365 days a year, that allows traders to react immediately to news — or even tweets. Indeed, this year, tweets from Elon Musk, CEO of Tesla, caused crypto prices to both jump and slump.
“Look, this is the Wild West, so you have to be ready for it,” Kuiper says. While bitcoin has experienced average annualized returns in excess of 200%, that’s come with huge price slumps, he adds. “You need to embrace the volatility if you want those gains.”
If you are ready to invest in crypto, here are a few of your options: Coinbase, Gemini, eToro, Robinhood and SoFi Invest.
Consider risk-reward dynamicsInvesting in crypto is not for everyone. Those who do dive in should remember this: Given the extreme volatility, moderation is key, notes Matt Schwartz, senior advisor and a certified financial planner with Great Waters Financial. Just as you shouldn’t invest all of your money in one asset — like a stock or bond — cryptocurrencies should have a limited impact on the risk-reward dynamics of your overall portfolio, he adds.
“If you have 2%-5% of your portfolio allocated to any asset class, that isn’t going to move the needle on your overall portfolio that much,” Schwartz says, adding that the exact allocation is unique to each investor. “It’s important to think about your own situation and how it may or may not help you accomplish your goals.”
Some investing pros say that if you do want to dive into crypto, a smart way to do it may be through dollar-cost averaging, which simply means investing a fixed amount at regular intervals. And be sure to consult an accountant about the tax implications of trading (it can get pricey).
Finally, be mindful of how investment decisions affect you. “Don’t take on so much risk that you can’t sleep at night,” Kuiper says. “But the opposite is true: If you’re constantly watching bitcoin because you have 0% invested and you’re watching it go up, you probably need to buy a little of it for peace of mind.”
If you are ready to invest in crypto, here are a few of your options: Coinbase, Gemini, eToro, Robinhood and SoFi Invest.
About the author: Anna-Louise Jackson is a financial journalist with more than a decade of writing and editing experience. She was a reporter for Bloomberg News, covering the U.S. economy, U.S. stock market, and corporate finance. Her work has also appeared in/on NerdWallet, CNBC, The Associated Press, USA Today, Forbes, Fortune, and Money.