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Cryptocurrency Investment Advisor or DIY? Important Factors to Consider

Liz Louw
25 October 2017

There is no doubt that the cryptocurrency market is booming right now. The increased coverage in mainstream media is helping to reach a far wider audience than before, and this is fuelling widespread interest. Not a day goes by where I am not engaged in a conversation about investing in bitcoin and alternative coins (outside of my professional capacity). Even a recent visit to my doctor landed up in bitcoin investment discussion. Ultimately, the question will be raised, “So, should I hire a cryptocurrency advisor?”

The answer is that dreaded non-committal, “It depends.” In order to decide whether you should be looking for a cryptocurrency professional to advise you on investment, you need to evaluate yourself against a few criteria. Ready?

5 Key Questions to Ask Yourself Before Hiring a Cryptocurrency Advisor

1. Do you Have the Experience to Achieve Your Investment Objectives?

When I speak about investment objectives, I am referring to whether you are looking to make short-term gains on speculative trades, if you are in for a long-term return on your investment, or perhaps hedging your traditional investment portfolio against adverse market events.

If speculative trading is your game,  you would need experience in active day-trading or find a broker who could facilitate this for you. If you are considering a long-term investment period, have a deep understanding of the technology that underlies the cryptocurrency market, and keep abreast of the crypto-politics that could swing the game, you might be in the position to manage your own cryptocurrency assets. If you do not fit into either of these categories, it would be wise to choose an investment advisor or firm that specialises in cryptocurrencies.

The cryptocurrency market is a highly technical, complex one to understand and navigate. Even those with above average technical understanding take some time to unravel and grasp the various aspects of the underlying technology. This is mainly because this is so far removed from what we have come to know about how financial systems ‘should’ work, and it comes with a steep learning curve. Often it is this factor that puts people off considering investing in cryptocurrency.

2. What is Your Risk Profile and Intended Exposure?

The rule of thumb for cryptocurrency investments is never to invest more than you can afford to lose.  Even with this caveat in place, your level of exposure to this high risk/high reward market should determine whether you do it yourself, or seek professional advice.

If you are serious about securing and/or growing your wealth through cryptocurrency, it would be in your best interest to consider contracting the services of a cryptocurrency advisor.

On the other hand, if you are an adventurer with some spare change to play with, a DIY approach may be suitable.  Why not choose a couple of coins to invest in as a means to learning the ins and outs of the market and do it yourself? Most investment firms require a minimum investment amount. That does not mean you can not start your own investment portfolio and grow it until you are ready and able to put down the required minimum investment.

3. Are You Technologically Savvy?

While blockchain companies like nChain aim to simplify cryptocurrency use to the point where your grandmother can buy her favourite gum with bitcoin, the truth is that we are just not there yet. Some exchanges and hardware wallets are still cumbersome and confusing to use, and take some time to navigate. You have to consider what level fees to include on a transaction in order for it to be processed quicker, or risk having it stuck on a congested network like it has happened on Bitcoin in recent weeks.

Also, bitcoin transactions are irreversible, just like a cash transaction which can only be undone if the receiver consents to it. If you are not confident that you would be able to comfortably process irreversible transactions and trades, it would be wiser to call in the professionals.

A professional cryptocurrency advisor will have insight of the technology, its nuances and abilities, and be able to guide your education at a pace and level appropriate for your knowledge. This does not mean that you need to learn how to write computer code or become the next Elon Musk to invest in cryptocurrency, but it does help to at least be familiar with the basic structure of the underlying technology and the concept of a decentralised network. It simply gives you a greater understanding of the unlimited possibilities and benefits it offers, and thus, why it will continue to grow in value.

4. How Conscious, Careful and Conscientious are You About Security?

Much like with a cash wallet or a stash of cash in your safe, loss of a bitcoin hardware wallet or your private key means that you lose access to the contents. Let me assure you that accidents such as these do not only happen to someone’s technology phobic grandmother. In a lecture on the economy of Bitcoin, Professor Malavika Nair admitted to losing access to her personal bitcoin stash through loss of her personal key.  What’s more, unintentionally leaking your private key would be equivalent to leaving your cash-filled wallet on a park bench and at the mercy of strangers.

Security is one of the most critical elements of cryptocurrency investment. While financial sovereignty has incredible appeal, it does come with the full responsibility of protection of your funds resting wholly on your shoulders. The Bitcoin network itself may be impenetrable by cyber-criminals, leaving your holdings in exchanges is a risky business, as they are subject to hacking attacks and there have been several instances where users have lost considerable amounts of money.

Securing your cryptocurrency investment goes way beyond installing anti-virus software. It requires strong technical knowledge and understanding of how these systems work, and where vulnerabilities may be exposed. If for nothing else, this would be one of our prime motivations to encourage you to seek professional cryptocurrency investment advice and services.

5. How Much Time Can You Dedicate to Your Cryptocurrency Investment?

For all of the investment scenarios described above, time is a crucial element for doing it right.

Learning about and keeping up to date with the market takes time (lots of it) and dedication. Making trades at the optimal moment takes time and requires a state of constant alertness. Keeping your investment secure throughout the process of online trades and transactions, offline cold storage, and password protection and preservation… it all takes a significant portion of dedicated attention. Understanding the tax implications of your investment and filing your return correctly takes time and research effort.

When all these activities are added up, it could make more sense to entrust it to a cryptocurrency investment firm that is already executing these tasks smoothly on behalf of their clients.

Final Thoughts

Being an industry steeped in technology, often the ‘human element’ of having an investment portfolio manager, or cryptocurrency advisor, can be a welcomed resource. At the same time, there are investors who are more than happy to go it alone. Overall, the goal of our cryptocurrency advisory service is to simplify investment for clients who are eager for growth, but anxious about the demands of the process.

At the end of the day, we urge potential cryptocurrency investors to do their homework, to evaluate their objectives and determine the best course of action for their individual circumstances.

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