Riding the crypto roller coaster

Trading or investing in cryptocurrencies is a highly volatile but also very accessible opportunity. There are many exchanges, trading platforms and apps that allow the potential trader to easily access the market. Unlike other markets which act in more sedate fashion cryptocurrencies can offer greater returns and of course the opportunity for greater losses. It also can act in funny ways when celebrities such as Elon Musk decides to tweet about Bitcoin or indeed his favourite altcoin, Dogecoin.

More recently the crypto market was hit by a double whammy of the failure of popular algorithmic stablecoin UST and its native token Terra Luna collapsing and losing billions of value from the crypto market and from people’s wallets. This in turn had a negative domino effect on other centralised crypto lending platforms notably Celsius, 3AC and Voyager. As a result, the market has been suffering a crypto winter for much of this year.

So, why would anyone consider investing in this market? Aside from the Fomo (fear of missing out) induced by the likes of the Terra Luna project and its huge returns, the overall sector has been growing significantly (even allowing for winters) which has prompted the entrance of institutional money. Back in 2020, the foray of “suits” into crypto prompted the last bull run which ended at the start of the year. So, despite the huge crushing losses suffered this year over the collapse of CeFi models, overall confidence is high.

Stephen Flood, chief executive of Greencore, is very much in the do-not-invest camp on cryptocurrencies. As befits a chief executive in the precious metals business, he prefers his investment vehicles to be backed by physical assets or governments. However, he does see the power of blockchain — the technology underlying cryptocurrencies.

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“For the first time, we have a new protocol that allows data to be encoded digitally, in a mathematically rigorous way, updated with by validated and trusted parties. The data is no longer siloed, outdated and requiring constant validation by trusted parties such as banks, auditors, or regulators. Imagine a gold bar’s digital twin in a secure Swiss GoldCore vault, reporting on its insurance status or environmental credentials.

“In a matter of a few years, industries will be transformed by standardised blockchain protocols to aid in the settlement and processing of transactions and almost incalculable added values — the gains are enormous,” he says.

“So forget investing in cryptocurrencies and invest in the infrastructure of everything — blockchain,” says Flood.

Staying with blockchain, Neal Roche is a director of Chorus One which runs multiple blockchain nodes and while not a financial adviser, has been investing in crypto projects for the past four years. Working in the sector gives him an advantage in understanding the projects but he stresses it’s a learning curve for everyone.

“If you are interested, then do your own research, check out the team behind any project and don’t be fooled by anonymous teams.

“Also, look for substance. Things like meme coins with anonymous teams can generate huge interest but also can ‘pump and dump’ — I much prefer to find projects that are building substantive projects. I tend to hodl (a crypto term meaning invest and not sell) and look for solid projects with staking options so I can hold my original investment but earn yield or interest at the same time.”

If uncertain about your ability to locate serious projects, then another approach is to invest in crypto venture capital (VC) funds. Connor Cantwell, director of Cosimo Ventures says his VC has been involved in crypto investing since 2016.

“We launched Cosimo X to invest in early-stage blockchain, Web 3 startups. The pace of growth in crypto is far superior to traditional VC investments,” he says.

The fund is a tokenised fund which means that while most VCs are closed to the ordinary Joe Soap, anyone with $10,000 can come and invest in this fund and receive a security token for their investment. There is approximately $20 million in the fund. Such was their success that Cosimo Y was launched last week in the US to focus purely on crypto with targets of $200 million.

“We can provide a risk portfolio from high to low so that investors can choose whatever suits their portfolio decisions,” says Cantwell.

Again it’s important to stress — DYOR or do your own research.