Cryptocurrency Investment Advice

Laszlo Hanyecz is an early Bitcoin developer and somewhat of a legend with crypto enthusiasts. Anecdotal evidence suggests that he is the guy who, in 2010, bought two Pizzas with 10,000 Bitcoins in order to prove that digital currency worked. In Q2 2018, those same pizzas would cost him over $900,000.

Things have changed drastically since Mr. Hanyecz proved his point. The best cryptocurrency investments are accepted by many retailers and can be traded on many platforms such as Coinbase and Bitflyer. A simple media search exposes how the conversation about cryptocurrencies has gone mainstream.

Cryptocurrencies – Vilified by Some and Praised by Others

In her Telegraph article, “Five investment trends to expect in 2018,” the award-winning personal finance journalist, Rosie Murray-West, points out that, “It seems 2018 will either be the year Bitcoin hits $10,000 or the year it tanks in value, depending on whom you believe.” Vilified by some and praised by others, the discussions around cryptocurrencies are abounding and controversial. In a contributed post on recode.net, Bill Harris the former CEO of Intuit and founding CEO of PayPal and Personal Capital, calls Bitcoin “a scam” and “a colossal pump-and-dump scheme.” While another, PayPal Co-founder, venture capitalist and early Facebook investor, Peter Thiel, is betting on the further growth of Bitcoin and sees it as a gold-like safe haven. Kate Roony, CNBC’s Markets Reporter attributed the following quote to Peter Thiel made during a conversation at the Economic Club of New York: “I would be long Bitcoin, and neutral to skeptical of just about everything else at this point with a few possible exceptions. There will be one online equivalent to gold, and the one you’d bet on would be the biggest.”

Fact check

CoinMarketCap, a website listing cryptocurrencies market cap rankings, currently lists 1,604 cryptocurrencies on its site. The total market capitalization for these currencies was close to $435 billion in Q2 2018. Here are some additional facts sourced from cryptocurrencychart.com:

  • The top four cryptocurrencies by market capitalization size are: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), BitCoin Cash (BCH) );
  • The top four cryptocurrencies by trade volume are: Bitcoin (BTC), Tether (USTD), Ethereum (ETH), EOS (EOS) );
  • Some cryptocurrencies like Tether (USTD) and Verge (XVG) show triple digit and double digit trade activity;
  • The first five cryptocurrencies make up almost 70% of the market cap with Bitcoin more than $155 billion, Ethereum more than $67 billion, Ripple $33 billion, Bitcoin Cash $24 billion, and EOS $15 billion.

While the cryptocurrency markets have grown dramatically, they are still small compared to certain national and regional money supplies, as well as the market cap of some global corporations. See examples below:

  • The money supply M1 in the United States of America as of March 2018 was at $ 3664.30 billion;
  • The money supply M1 in the EU was at 7.189 trillion euro in 2016;
  • The money supply M1 in China was at 52350 CNY billion in March 2018;
  • The market cap of amazon.com (AMZN) in 12/29/17 was $ 563.5 billion; that of Alibaba Group (BABA) at the same time $ 442.4 billion.

A Steadily Rising Market Cap

The market cap for cryptocurrencies is steadily rising, while the markets show big swings and volatility.
The following chart depicts the rising market cap of cryptocurrencies were generated using the Crypto Currency Chart tool.

Helping Clients Capitalize from the Cryptocurrency Trend

It is important to educate your clients about the possible risks and rewards of cryptocurrencies. “While you can have huge upsides trading cryptocurrencies on an exchange directly, you can potentially also lose it all,” says Michael Welter, Head of MIGAM Global. However, financial services providers started recognizing the demand for financial products working with cryptocurrencies in their client base and are developing new products. One of the latest institutions moving into this space is investment banking giant Goldman Sachs, which is poised to launch a Bitcoin trading desk this year. This is happening as governments worldwide step in to regulate the market place to create legal frameworks to protect investors and help the industry navigate uncharted territory.

“It is essential that you have a partner that is both well-versed in cryptocurrencies, and also can offer high performance products backed by solid organizational support,” says Welter. “For example, MIGAM offers the Eljovi Multi-Strategy Fund which has an historical annual return of 30-35%. The multi-strategy fund relies on asset allocations in three key areas: arbitrage (40%), mining (30%) and spread trading (30%),” said Welter. He added,”The multi-strategy fund leverages arbitrage trading in inefficient markets and cryptocurrencies in emerging markets. We focus on achieving maximum returns with minimum risks.”

The take-way

Cryptocurrencies are one of the top investment trends in 2018. While even the best crypto currency investment can be a lucrative investment yielding double digit returns, they also can be very volatile and cause total loss of funds when traded directly. Adding to uncertainty is the fluid regulatory and technological space in this area, which are best navigated with a partner offering a solid product and the right amount of organizational support to enable you to help your clients achieve their financial goals.

Mike Welter is the Director of Migam Globel, an international provider of premier investment, insurance and family office products and services such as Wealth FriendsWealth InsuringWorld Class Brands Portfolio Strategy, Eljovi Multi-Strategy FundEljovi Indian Arbitrage Fund, and the Family Office Fund. Connect with us on LinkedIn or on Twitter at @GlobalMIGAM.

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