Do you believe Bitcoin and cryptocurrencies are ready to skyrocket again?
Since its inception in 2010, Bitcoin was the first digital asset to beget an entire ecosystem of cryptocurrencies. For quite some time, it grew an underground following of investors who seemed very interested in its future as a possible replacement to the physical monetary system, as traditional institutional players curiously watched its development.
While we are still likely many years away from a complete transition, the crypto space has been a fairly volatile playground. During the ascension and adoption of crypto, many people launched ICOs (Individual Coin Offerings, akin to offering a new stock) without any supervision or regulation. During this time, Bitcoin led the charge to a valuation of nearly $20,000 per coin in 2017, but then its value steadily declined over the course of 2018 and settled in the range of $3,500 to $4,000 for quite some time.
After witnessing the meteoric rise and subsequent fall of Bitcoin's value, many folks became gun-shy about investing in cryptocurrencies. However, recent activity has caused Bitcoin's value to significantly rise at the time of this writing and has caught the attention of many existing and would-be investors.
During the past couple of years, the crypto market has matured with more oversight and regulatory controls in place by both institutions and government agencies. As a result of these measures and more institutional dollars supporting the industry, more people are now seeking ways to reduce their risk while still seizing a profitable ROI.
In today's "instant gratification," microwave-results society, many people are looking -- again -- to time the crypto market and win big, almost with a "win-the-lottery" type of mentality.
However, Parul Gujral says this is a recipe for probable disaster. In my video interview with the CEO of Snowball, Gujral agrees that you can still win big if you time the market just right, but as many people experienced in 2018, you can also lose big just as quickly.
He believes the key to success when it comes to investing in cryptocurrency is to diversify your risk by investing in a pool of cryptocurrencies that are vetted by financial professionals, just like your 401k accounts or index funds.
"With our mobile app, we let you invest in cryptocurrencies or digital assets like Warren Buffet wants you to invest in stocks through the S&P 500. Warren Buffett, Ray Dalio and even Tony Robbins in his book, Money Master the Game, all recommend index investing. By investing in an index, the fees and risk are much lower, it's tax-optimized and you can typically outperform the market," Gujral said.
The recommendation of investing in an index fund means you're not putting "all your eggs in one basket" like many people did when they invested in a single coin or ICO and lost big when the cryptocurrency market deflated in 2018.
Paul Veradittakit, a partner at Pantera Capital, also recommends the concept of diversifying cryptocurrency investments: "I think if you're an individual investor, it makes sense to try to diversify as much as possible just because there is a lot of risk in cryptocurrency and a lot of volatility, and you want to make sure that you have a basket of them and hopefully hit on one of the investments that will do very well."
However, most people only have access to invest in crypto funds or indices if they are an accredited investor -- someone who makes over $200,000 for 2+ consecutive years and/or has $1 million of assets, not counting primary real estate. This means the novice or average person typically doesn't have the ability to invest in a crypto fund.
It’s a major reason why Gujral founded Snowball and hopes his app will help democratize access to the best crypto fund and index strategies. He believes the average investor should be able to wisely invest in the cryptocurrency sector with less friction and reduced risk.
Invest through regulated professionals.
Another challenge is finding those financial professionals who can effectively research and recommend a portfolio of cryptos that provide a steady return-on-investment (ROI) while minimizing your exposure to a bear -- or down -- market.
There are a plethora of options when it comes to cryptocurrency apps and investment platforms, but one of the differentiating factors investors should seek when working with financial professionals are those who have earned Registered Investment Advisor (RIA) status by the Securities Exchange Commission.
As the cryptocurrency ecosystem continues to evolve and become more complex, it will only become time-consuming and challenging to know which coins and tokens are worth betting on and which ones to avoid like the plague. Working with registered professionals may help to save time and hopefully increase your odds of a profitable investment.
A worthwhile resource is the SEC investor bulletins which provide a list of tips and questions to ask before selecting a financial professional as a service to investors.
Focus on education and wealth accumulation.
Regardless, it's not wise to ignorantly entrust your capital to any financial advisor, app or crypto company without doing any of your own due diligence and research. After all, you're ultimately responsible for the outcome of your decision.
Gujral recommended Coinbase Earn as a good place to start for education. According to their site, Coinbase offers to pay people to learn about cryptocurrencies as people complete educational tasks like watching short video lessons and completing quizzes. Their organization is a regulated broker-dealer and, according to Gujral, they've received their RIA designation from the SEC as well.
During an interview with Gordy Bal, the CEO of Conscious Thought Revolution who has invested in companies like Bulletproof Coffee and WAX, I asked why people should educate themselves about the industry. He replied, "Over the next 25 years, Accenture reports there will be a wealth transfer of over $30 trillion in North America moving from baby boomers to their heirs, and it will be the greatest wealth transfer in history. There is no question if cryptocurrency is going to be a thing. It's just an inevitability. I think what would serve people really well is to understand the underlying technology from a philosophical standpoint and how it can serve a greater purpose."
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