Are crypto-assets worth investing in?
This article is for you if you’re curious about cryptocurrencies and want to understand how they work, or if you want to assess whether they’re worth investing in. We provide clear and practical information to help you make safe and informed decisions.
What are crypto-assets?
Crypto-assets are digital assets that use cryptography to ensure security and authenticity. They operate on decentralised networks that are usually supported by blockchain technology – a public, immutable record of all transactions. Bitcoin is the best-known example, but there are others, such as Ethereum and stablecoins, which are designed to maintain a stable value. Unlike physical coins or banknotes, cryptocurrencies have no physical form and are not issued by central banks.
For example, when you receive one Bitcoin, the transaction is recorded on the blockchain, making it both unalterable and transparent. Another example is non-fungible tokens (NFTs), which are crypto-assets representing unique assets, such as digital works of art. Unlike traditional currencies, cryptocurrencies allow for quick transfers anywhere in the world without the need for intermediaries, such as banks. However, due to their high volatility, they are a risky investment.
What types of crypto-assets are there?
The term 'crypto-assets' covers a wide range of digital assets, each of which has its own specific function. The main types are:
1. Cryptocurrencies
They function as a medium of exchange in a similar way to traditional money. Bitcoin is the best-known example, but others include Ethereum, Litecoin and Ripple (XRP). They can be used either to purchase goods and services or as an investment.
2. Stablecoins
These are cryptocurrencies with a stable value, usually linked to traditional currencies such as the euro or the dollar, with the aim of minimising volatility. Examples include USDT (Tether) and USDC. When you send 100 USDT, its value remains close to 100 dollars with minimal fluctuation.
3. Utility tokens (Utility tokens)
They provide access to specific products or services on a specific platform, acting as a digital "key”. For example, the BNB is used on the Binance platform to pay commissions at a discounted rate. Take gaming platforms, for instance. There, tokens can be used to unlock special levels or items.
4. Tokens of security (Security tokens)
These are digital representations of investments, such as shares or bonds, and are regulated as securities. A token , for example, could represent a share of a property and the right to a portion of its income.
5. NFTs (Non-Fungible Tokens)
These are unique crypto-assets that certify ownership of exclusive digital goods, such as artwork, videos, and video game items. Unlike cryptocurrencies, which are fungible, each NFT is unique. When you purchase an NFT representing a digital artwork, you become its sole owner.
Are there any rules governing the world of crypto-assets?
Until recently, the crypto sector was largely unregulated, which increased the risks for investors. However, the European Union has introduced the Markets in Crypto-Assets (MiCA) regulation. This obliges cryptoasset service providers, including trading platforms and digital wallets, to obtain authorisation and supervision, and to guarantee transparency in consumer protection.
Nevertheless, there is no central authority, such as a central bank, that regulates cryptocurrencies. If losses or fraud occur, it’s possible that there won’t be any mechanisms in place to recover them.
Why should you invest in crypto assets?
There are a number of reasons why crypto-assets attract investors and technology enthusiasts:
• Despite volatility, well-planned investments can generate significant returns;
• Decentralisation gives you greater autonomy, freeing you from the control of governments and central banks;
• Blockchain ensures transparent and permanent transactions;
• Some cryptocurrencies facilitate highly private transactions;
• Anyone with an internet connection can invest, regardless of their location;
• They provide access to financial services in areas that do not have traditional banking systems.
Some risks of crypto-assets that you should be aware of
Despite their advantages, crypto-assets pose significant risks, particularly to inexperienced investors:
• As there is no legal protection, you are liable for any losses or fraud and there is no guarantee of repayment;
• Prices can fluctuate dramatically over short periods;
• Digital platforms and wallets are vulnerable to cyberattacks, which could result in the total loss of funds;
• Fraudulent schemes, such as Ponzi schemes, are common in this sector;
• The market is so complex that it can lead you to make uninformed decisions or create unrealistic expectations.
Is it worth investing in crypto-assets?
Although investing in crypto-assets can offer opportunities for earnings and access to innovative technologies, it involves high risks such as volatility and a lack of legal protection. Therefore, investing in cryptoassets can be advantageous if you are prepared to take on the risks and are willing to learn about and follow the trends of this rapidly changing market. However, if your investor profile is conservative or you prefer more stable investments, it would be sensible to consider alternatives.
Investing in crypto-assets: 5 practical tips
If you are considering investing in crypto-assets, follow these recommendations:
1. Thoroughly research the exchanges (exchanges)
Analyse the available exchanges before you invest. They are not all reliable or secure. Make sure they are registered with Banco de Portugal. Read user reviews and contact the Banco Carregosa NextGen team of experts for guidance.
2. Choose carefully the location you choose for storing your crypto-assets
When you buy crypto-assets, you can choose to store them in a wallet or on the trading platform. Find out more about the GoBulling Investor platform, which offers a simple, practical and intuitive investment management solution.
3. Diversify your investments
Don’t put all your capital into a single cryptocurrency, such as Bitcoin. The market offers thousands of different crypto-assets, each with its own objectives and risks. Diversification reduces the impact of sudden devaluations.
4. Prepare for volatility
The prices of crypto-assets can change abruptly. This type of investment may not be suitable for you if you can’t tolerate fluctuations or aren’t prepared for losses. Set clear limits on how much you are willing to risk.
5. Adopt good online security practices
Last but not least, make sure you use strong passwords, activate two-factor authentication, and avoid sharing personal data on unsecured networks or platforms.
Alternatives to crypto-assets
If you think that crypto-assets are too risky, there are alternatives that will allow you to diversify your portfolio with less volatility:
1. Term deposits: security and predictability
Although they offer more modest returns, term deposits are a more conservative option that provides greater security. At Banco Carregosa NextGen, products such as the "Grow On” and the "Quick Win”, which have terms of between 3 and 6 months and offer guaranteed returns, are ideal for those who prioritise low risk and predictability.
2. Shares in companies linked to the crypto sector
If you're interested in crypto-assets but prefer regulated investments, consider investing in the shares of companies in this sector, such as trading platforms, blockchain technology providers, or hardware mining manufacturers. Traded on traditional stock exchanges, these companies offer greater transparency and less risk when it comes to exposure to the sector.
3. ETFs with exposure to crypto-assets
Exchange Traded Funds (ETFs) track the performance of indices, sectors or assets. Some ETFs focus on companies linked to crypto-assets, while others track the value of cryptocurrencies such as Bitcoin and Ethereum. The automatic diversification and reduced costs are the main advantages.
4. Investment funds with exposure to crypto-assets
Another option is to invest in funds managed by professionals that allocate some of their assets to cryptoassets or companies in the sector. If you don’t have the time or experience to follow the market in detail, active management by specialists is the ideal solution.
With the GoBulling Investor platform from Banco Carregosa, you can access a wide range of financial instruments, including ETFs, shares, investment funds and other instruments with autonomy, security and transparency.
Take the next step with Banco Carregosa NextGen
With Banco Carregosa NextGen, you have access to a team of experts who can help you understand the market and make informed investment decisions. The GoBulling Investor Platform is a simple, secure and robust tool for managing your digital investments. Contact us to start building your financial future today.