Wealth Management Pillar: Investing in the Crypto Space? Knowing which market you are in | newsletter

Written by Uwe Zimmer, General Manager, z-Invest GmbH, Cologne

Customizations are not always very straightforward. Bitcoin can be used, for example, as a leading and major currency, as a currency along with the euro and the dollar. It serves no purpose other than that. Classic coin. Or rather a safe haven like gold? Inflation hedge? Possible, because their number is finite, and the creation of new numbers is no longer possible at some point. If you then want to buy Bitcoin, you have to buy it from someone else. This raises the price and can insure value. So a precious metal? In any case, Bitcoin should be treated as such because it is useless, useless, and derives its value only from its attractiveness to people.

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A completely different story can be told about many other cryptocurrencies. Although they are coins, they are expressly made to be paid in their own realm. In fact only accounting units for services rendered and required on the blockchain. So its value depends on the success of the underlying project. For example, if the blockchain can convince with transaction speed and price, it will be used by many. This drives the demand for local currency and benefits holders. In the end, however, the analysis should not focus on the currency, but on its basis. They are basically small tech companies, and investors have to think the same way.

Small, but that’s relative. The Ethereum network, for example, which is the second largest cryptocurrency with ether, is now a blue chip. It is used millions of times to process transactions and write smart contracts on them and at the same time the second level blockchain has settled on them. All this makes Ethereum a great technology company, an alphabet of cryptocurrencies. With the corresponding consequences, because here too, the limits of growth may be reached at some point, which may turn growth into an investment in value.

Several NFTs are currently processed via Ethereum. This particular form of crypto-asset is just getting started. For some of the early NFTs, art market rules – somewhat opaque – apply rather than those of the stock exchange. The price is satisfactory. There’s a wave breaking out here that applies similar standards to NFT art as to the classic art market. So, if you can discern the quality, you can go in.

However, the approach of decentralized, self-managed companies is also becoming more important with NFTs. NFT owners are like shareholders – unregulated, of course – with voting rights. You decide where the company’s journey is headed. The following applies here: If you let yourself get carried away by the charm of the new, you must first check the basic data of these very small businesses. These are collectively controlled startups – success and failure are very close here.

Another market is becoming more and more popular in the NFT segment. The first projects are just getting started, which have a purpose beyond just making money. This does not mean selling NFT art for a good reason. Projects that provide real access succeed here, such as direct exchanges with environmental activists or visitation rights at strictly protected zoology facilities where nearly extinct species are bred. Projects like these follow the logic of impact investing and enable investors to use their money to directly influence the betterment of the world.

In this regard, not all investments in cryptocurrency are new and foreign, many of them follow the guidelines of the current market logic. If you do not let yourself be fascinated by the allure of what is only technically new, here you will find good projects based on a very classic analysis.

More and more private investors in Germany are trusting asset managers that are independent of banks when investing their money. Apart from products and sales interests, they can advise their clients in the best possible way. You can find more information at www.v-bank.com.

The text above reflects the opinion of the respective columnist. finanzen.net GmbH takes no responsibility for its correctness and excludes any claims for recourse.

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