Published November 28, 2022, 10:00 amUpdated November 28, 2022 11:39 AM.
Is this the beginning of the end of cryptocurrency? Thanks to their magical investment image, which allowed them to earn fast, big and every time, they were a success, especially among young investors. A big warning blow already hit these markets in May and June last year, causing a serious drop. The collapse of the dollar price of bitcoin is dizzying: – 65% since January and – 70% for the current year (as of November 28, 2022). And the bankruptcy of the second crypto exchange FTX, the consequences of which we have not yet assessed, will not help raise prices.
However, those who wish to embark on this new universe based on blockchain technology must do so with the utmost care.
Invest only what you are willing to lose
The difficulties faced by investors who see amounts invested in cryptocurrency savings accounts blocked, although presented as liquid, illustrate the risks associated with these investments. Therefore, you should not invest amounts that you will not need in the short or medium term, and even tell yourself that you are ready to lose them. Moreover, this heightened volatility should not be reduced: “cryptocurrency is still considered a speculative asset used by professional investors,” explains Vincent Boy, market analyst at IG France.
The latter indicates that the downtrend may continue in the coming months. “The weight of crypto assets in financial investments should never exceed 2.5% to 5%,” recalls Malek Ziane, asset management consultant and founder of Noun Partners.
Don’t Bet Everything on Cryptocurrency
More than 20,000 “cryptocurrencies” are available on the Web. They are born and disappear every day. Great, this choice turns out to be difficult. No one knows what the future of “cryptocurrency” will be, let alone its life cycle.
As with any investment where visibility is limited, it is important to follow the basic rule: never put all your eggs in one basket. This parade allows you to limit the risk by diversifying your positions in different currencies, preferably in the most liquid ones.
In addition to bitcoin, many other virtual “currencies” are widely accepted, such as Ether, Tether, XRP, USCoin, Litecoin or Nem. If the selection and monitoring of these investments becomes too time-consuming or difficult, more and more platforms offer turnkey management mandates with a standard asset allocation distributed across multiple “currencies” according to its risk profile. However, the prices of these different assets are broadly correlated. In this respect, diversification has its limits…
Investing over time
Since the crypto market is far from being a long calm river, a prudent and measured strategy would be to invest gradually, placing small amounts. Following this line of behavior, we buy at different market levels, which smooths out the entry price.
Those with the strongest nerves may end up taking advantage of the downturn in the market to gain strength. Several platforms offer applications for investing very small amounts in cryptocurrencies. This “savings” is based on rounding in cents (upwards in euros) for purchases made with their payment card.
Beware of scams
The Internet is an ideal platform for scammers of all stripes, especially when it comes to financial investments. Crypto investment offers abound, and they promise staggering returns. Even if these offers are less credible in a bear market, it is advisable to remain indifferent in the face of well-rehearsed commercial discourse.
In order to offer to buy or sell crypto assets online and store them, the platform must be registered with the Autorité des Marchés Financiers (AMF), which will grant it the status of “digital asset service provider” (PSAN). There are currently just over fifty in France.
This regularly updated list of authorized operators is available on the AMF website.
One more warning: avoid platforms that offer winning investments in derivative crypto assets. There are many scams. As soon as it becomes aware of fraudulent activities and financial losses incurred by depositors, AMF updates its black list of illegal sites, which already includes more than 100 items. It’s available on his website. If you have any doubts or questions, you can contact the Epargne Information Service on 01 53 45 62 00.