How to class cryptocurrencies in your investment portfolio

The advent of cryptocurrencies has added tremendous value to the world. Even those who hate crypto know this. The problem of the big institutions in the business world is that this invention came from an angle they were not expecting. The existence of crypto might just have solved the poverty problem in the world. But it is still quite early to ascertain that. No longer are people born in a country subjected to the currency status of the state. Now there is an option, and productivity in harsh places can be rewarded despite the economic position of the government in that country. People are waking up all around the world to value creation, but politics make governments so slow to match up to meet the needs of productive people. But now people have an option; cryptocurrencies. You might not get it if you live in a first world country. But if you look at the economic situation in other (not-so-buoyant) countries; you’ll get it.

Advanced economy countries are finding it hard to digest the reality of cryptocurrencies. That’s because of the freedom it gives. From their history and experience, they see the human race as needing lots of rules and regulations to live in peace and harmony. Money is a very sensitive matter and they sure want peace and tranquility around the subject of money. But the more secure and regulated they make the society, the less freedom there is in the society. And as such, over-regulate the society to the point where the ruling class become enemies of the people they are protecting. They become too bonded with the ideas that they lose touch with the people. With financials, the world shouldn’t be punished for the mistakes of some people. Although oversimplified, this is the case for cryptocurrencies.

Cryptocurrencies are here to stay. Even JP Morgan agrees to that now. But the problem is how to class them. I believe if one sticks to the fundamentals, one would not be caught in a bubble. Each cryptocurrency is different and should be approached differently. However, there are general lines of interest. I will be using bitcoin as a point of reference.

Bitcoin is not an asset, commodity, safe haven, currency, or investment. You can see a more detailed explanation here.

Bitcoin is an investment vehicle. It can act like any of those 5 listed, but it isn’t any of them. Bitcoin is a vehicle that carries the capacity to create its own financial ecosystem. It is a revolution; a vehicle to escape financial oppression unlike any other. What you decide to do with it is up to you. The use cases for it has been growing and believe me, we haven’t seen the best of it yet. So, how does one class it in investing?

Here is what we have seen so far; because of its recent (and future) ties to wallstreet, you can expect it to be affected when stocks are affected (until the ecosystem grows big and independent enough). However, though they may fall the same time, their rise is not connected. Bitcoin comes in handy in a bull market. If you have no bitcoins in a bull market, you will be very limited and will miss out on a lot. There will be no way to get into the crypto ecosystem (which seems to be the fastest growing currently).

When is crypto in a bull? When speculations are high and lots of people are coming up with great things. What of a bear market? It is the time to consolidate your position for the next bull. If you don’t get in at the bear, you will get in at the bull and you may be burned. When is the bear? When FUD is thick in the air and the charts are in red. Always be rest assured, the crypto world has come too far to descend into obscurity. The strength of crypto is the community. The value of bitcoin is in its community. You must remember that the chart has two directions; up and down. Crypto (at this time) does not stay flat for long.

Bitcoin and other crytocurrencies are held up to be used. It can be used to transact, but the investment purpose is to save up some money to invest or purchase (when the value is substantial). You don’t have to be overly calculative about it, just keep saving there regularly no matter the price. When it can afford what you want or you see a suitable investment in the crypto world; go for it!

This shows you will still need gold, bonds or another asset to protect your crypto investments in a bear market (which is to prevent you from cashing out at a loss). Be sure to do so. If all you own is stocks and cryptocurrency, your portfolio is not balanced at all. Spare yourself the heartache, protect the downside.