Chapter Twenty: Cryptocurrencies The 21st Century Opportunity
At Turnkey Family Office, we are continually looking for new and emerging opportunities of all kinds, and in particular with technology, that can be extremely challenging. New technology can come along promising to change the world, but within a few years be as obsolete as a CD player. Finding effective vehicles for investment means identifying technologies that offer true value to the market and a robust model that will build a lasting need.
Although dramatically misunderstood in its early existence, Bitcoin, and the cryptocurrencies that followed, meet these criteria, and from initial launch in 2009 have a proven record of generating tangible profits for investors.
The Digital Currency Opportunity
One of the major barriers to entry with cryptocurrencies is understanding the opportunity itself. For most of us, perhaps the first introduction to Bitcoin was within the 2017 headlines as it soared from $1000 to $17,000 in a matter of a few months. Usually something with that volatility would be avoided, but if we look behind the headlines and there is more to it.
In fact, these digital currencies provide several opportunities for profit, some more suitable than others. Although the name describes Bitcoin, Ethereum and the hundreds of other examples of this technology as currencies, and they can indeed be used that way, the better analogy is of an asset, such as Gold. Like Gold, there is a limited amount of each cryptocurrency, there can only ever be 21 million Bitcoin, and so rarity is built in. Also, like Gold, each Bitcoin or other coin must be ‘mined’. Mining in this context means using computer equipment to solve specific calculations that generate the cryptocurrency as a result.
This makes three different opportunities within the cryptocurrency industry.
Use Cryptocurrencies as an asset
Firstly, cryptocurrencies can be used as an asset to store wealth. They sit outside of the traditional economy, and like precious metals, can be used as a hedge against stocks or other investments. This is not without risk, as although long term prices have continued to rise, short term volatility can be problematic.
The second opportunity is mining. The biggest cryptocurrency, Bitcoin, requires specialized equipment to mine effectively, however with the price of Bitcoin high it offers an attractive return on investment. But a fall in value can cause issues, and with other currencies shifting to different models, like Ethereum, the mining opportunity has an uncertain future. With a focus on sustainability, the vast amount of energy used to mine these currencies has fallen under scrutiny, and as a result pressure to change the mining methodology is mounting.
That leaves us the third opportunity, trading cryptocurrencies. This has proven to be extremely profitable, with a wide range of currencies to choose from and good volatility generating price movements. As with any investment, from Forex to Stocks, understanding the market is essential.
As traditional institutions like Wall Street embrace cryptocurrencies, including placing Bitcoin in its futures market, the options for trading grow. With the underlying tech of all cryptocurrencies, Blockchain, also being embraced in finance and other applications, the future of these cryptocurrencies seems robust.
With the ability to easily trade Bitcoin and others, both against traditional currencies and each other, cryptocurrency trading offers an opportunity to take advantage of the growth of cryptocurrencies with a portfolio that sits slightly apart from other investments. It has manageable risks, and because the market is not tied to stocks or national economies, provides new profit opportunities compared to existing investments.
Turnkey Family Office can provide the support and insight to help you establish and manage investments within this space, ensuring you can always make informed choices with every opportunity.
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