Cryptocurrencies - The Promise of Quick Wealth?

Cryptocurrencies - The Promise of Quick Wealth?

6/13/2022

You've probably heard a lot about cryptocurrencies...


—> You surely don't want to base your savings on faith in something intangible.

Are they suitable for me?

If you live in countries affected by a currency crisis (Venezuela, Argentina), then cryptocurrencies might be for you. But if you live in a normally functioning economically developed state, investing in cryptocurrencies represents a very risky investment.

What are they and where did they come from? 

Cryptocurrencies are electronically created digital currencies created to increase financial system transparency and improve the security and speed of value transfers.

The most famous representative of digital currencies is undoubtedly Bitcoin. It was created back in 2009, but it gained more popularity in recent years. This currency was created in a way that it cannot be influenced by any government or central bank.

Cyber-coins are "minted" by a network of computers with specialized software programmed to release new coins at a stable but steadily decreasing pace. The number of coins in circulation is supposed to reach 21 million in the end, around the year 2140.

There are many cryptocurrencies, so it's expected that many of them will cease to exist in the future because there won't be enough room for all.

Why the volatility?

In virtual asset markets, moods change faster than the weather due to several factors. While tangible companies back securities, virtual currency relies solely on faith that it functions within a certain system and will be usable in the future. 

Prices are often determined by publicity, emotions, and sometimes by various manipulators. A single social media post by a famous personality praising or criticizing a specific cryptocurrency can move its price by tens of percent.

Financial models used in regular exchanges don't work here; investors follow whispers on chat servers instead.

The term "cryptocurrency" is actually misleading. A currency in the true sense must function both in the long and short term. If a cryptocurrency can lose 40% of its value in one month, we can't talk about value retention. So, we're more in the realm of commodities. For example, gold acts as a value preserver in the long term, but not necessarily in the short term.

Advantages or disadvantages? 

What's the approach?  

Your problem might even be the password... forget it, and your coins are irretrievably gone...

I'm not a big advocate, and they don't appear in my clients' portfolios. However, if you're into adrenaline sports and are prepared to lose your savings quicker than hitting the enter key...

If you still want to invest in cryptocurrencies, answer the following questions: 

  1. Which ones to invest in?
  2. Is it worth mining them? Where to trade and store them?
  3. How will cryptocurrencies transform society?
  4. What is their main benefit?
  5. Can I handle their significant declines?

Feel free to contact us for any further questions!

Do not hesitate to contact us

Contact

Ing. Petra Štěpánková, MBA, EFA

+420 604 218 602

petra@meliorinvest.cz

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