One of the most common questions asked by Moneyweb readers new to cryptos is where to start.
‘Should I buy Bitcoin, should I buy Ethereum?’
We don’t give out financial advice, and remind readers that cryptos are highly risky, volatile, and, should you choose to invest in them, then do so with money that you are prepared to lose.
Readers are nevertheless bedazzled by the kinds of historical returns generated by cryptocurrencies such as Bitcoin and Ethereum. Bitcoin is up nearly 200% over the last 12 months, and Ethereum an incredible 770%.
Not too late
Another common question is: ‘If they have gone up in price so much over the last year, isn’t it too late to get in? Have I missed the bus?’
Sean Sanders, founder and CEO of crypto investment company Revix, says this is a question he was asking himself when first getting involved in cryptocurrencies back in 2015.
“I also believed I was way too late into the crypto market back in 2015. It’s a question I hear every year, and I am sure it is a question that people will be asking 10 years from now.”
The answer to that question is no, it is not too late to get into cryptos, because we are at the start of an entirely new financial system.
You cannot equate cryptos to stocks. They don’t easily compare.
For a start, a cryptocurrency like Bitcoin does not have cash flows underpinning its price in the same way Apple shares do. People are backing Bitcoin because it is seen as a store of value, something they expect will preserve wealth better than fiat currencies such as the US dollar and the rand.
The story behind Ethereum is somewhat different. It is a relatively new financial network – with its own currency, Ether (ETH) – that serves as a platform for numerous other cryptocurrencies, as well as for the execution of decentralised smart contracts.
Smart contracts are pieces of computer code, written on the Ethereum blockchain, that execute transactions without any intermediary being involved when certain conditions are fulfilled – such as an insurance policy payout for hail-damaged cars when a storm hits, or the ability to lend, borrow and earn interest using ETH as collateral.
Ethereum’s goal is to become a global platform for decentralised applications, allowing users from all over the world to write and run software that is resistant to censorship, downtime and fraud.
ETH is ideal for crypto beginners and veterans alike as it’s one of the largest, most tested and reputable cryptocurrencies around.
The price of ETH has appreciated 386% since the start of 2021 alone, driven by wider adoption and technological improvements that will allow it to perform functions faster and more efficiently.
Sanders says many newcomers to cryptocurrencies choose a direct investment in bitcoin (BTC) and ETH, though increasingly the trend is towards index investing of the type offered by Revix. These crypto ‘Bundles’ are similar to investing in the Satrix 40…
Read more:Cryptocurrency investing for beginners