3 things to remember as a first-time crypto investor

By Edlyn Cardoza

For several industries, right from supply chains and shipping to healthcare and banking, the blockchain technology underlying cryptocurrencies and bitcoin has been hailed as a potential gamechanger. With the removal of trusted actors and intermediaries from computer networks, distributed ledgers can facilitate new types of economic activity that were not possible before.

This potential makes up for an attractive investment for those who believe in the future of digital currencies. People who do believe in that promise, investing in cryptocurrency becomes a way to earn high returns while also supporting the future of technology.

Since its inception in 2009, cryptocurrency trading has taken the financial world by storm. Digital currency is gaining rapid popularity among every generation.

2022 will be an exciting year for crypto innovation and adoption. The market is expecting to see more fund launches, more NFT creation and ownership, broader public participation in crypto markets, and revolution across the digital asset spectrum from progress in the adoption of stable coins and CBDCs, to the rapid rise of DeFi. Entering the new year, Blair Halliday, Head of UK at Gemini, shares his advice for first-timers ready to approach crypto.

• Invest time to learn

New investors might feel like they’ve already missed the boat on crypto. That isn’t the case; there is still an opportunity to be part of this new frontier in finance. However, we believe education and preparation are vital when approaching this new asset class. If this is your first-time investing in cryptocurrencies, read up on the broader digital assets market – get a feel for the industry and the different types of coins available. Don’t invest if you aren’t sure of the risks and, when you do invest, choose a platform with institutional-grade security and custody.

Cryptoassets aren’t covered by the Financial Services Compensation Scheme, as your money is with high street banks, so it’s essential to transact through an exchange that has received FCA approval, such as Gemini. This ensures that you are doing business with a firm subject to regulatory oversight.

• Inflation-proof your portfolio

Gold has long been the go-to as a hedge against inflation. But the price of gold suffered last year as investors fell out of love and looked to other assets for protection. Bitcoin’s lack of correlation to traditional asset classes has led to many arguing it has usurped gold’s place as the mainstream choice for inflation hedging.

Consider whether cryptoassets offer the right inflation-proofing for your portfolio. Bitcoin’s finite amount has reassured investors, both retail and institutional, that it will hold its value. This argument is increasingly relevant as central banks continue quantitative easing programmes pumping fiat currency into the traditional financial system, ramping up inflationary pressures.

• Diversify your investments

Cryptocurrencies are genuinely uncorrelated from traditional asset classes and offer attractive diversification benefits. But there is also considerable diversification potential within cryptoassets across various tokens, platforms and technologies. For new investors building cryptocurrency diversification, you could hold bitcoin, ethereum, and litecoin, each of which is built with different benefits – for example, bitcoin was designed to be an alternative to traditional currencies. At the same time, etheruem is a programmable blockchain that underpins many decentralised finance projects and the NFT (non-fungible token) digital art space. For more knowledgeable crypto investors, mainstream, regulated exchanges offer at least 40 other cryptocurrencies you can choose to hold as well.