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Over 10 years have passed since the creation of Bitcoin by the obscure Satoshi Nakamoto. In the time leading to 2021, thousands of other cryptocurrencies have been invented including the currently-popular Ethereum, Dogecoin and Litecoin. Yet which of these is the best to invest in? Should you invest in cryptocurrency at all, or are there other (better) options?
In this short guide, our investment team at Bure Valley Group offers some thoughts on these important questions. We hope you find this content insightful. Find out more about our EIS and other investment opportunities by visiting our portfolio page here. To enquire regarding our latest projects and funding, you can reach us via:
+44 160 334 0827
The cryptocurrency landscape in 2021
Cryptocurrency (crypto) is a digitally-based form of payment with no physical coins or notes. It also has no central ledger or authority like in a national bank. Instead, the “ledger” is public via sharing across notes which participate in the network – which could include PCs, laptops and other personal devices within households. Control, therefore, is decentralised and distributed through a blockchain system.
Bitcoin was the first decentralised, digital cryptocurrency to gain worldwide use. At the time, a single “coin” was worth a fraction of a US Dollar. Today, in 2021, this value has soared to over $50,000. Those investors who took a gamble on Bitcoin early on and held it, therefore, are now potentially standing as millionaires. Yet other cryptocurrencies have also gained huge traction in recent years. Ethereum is a notable case in point, with a year-to-date price rise of 160% on 18th February 2021 – standing at $1,918.52. Dogecoin – a previously obscure cryptocurrency – has also risen in value in recent months, especially as Elon Musk has Tweeted his support. The rise of Dogecoin to £4.6bn is particularly remarkable given that it was originally started as a joke.
Choosing a cryptocurrency to invest in
Accurately and consistently predicting which cryptocurrency will rise in value is impossible. Yet there are reasons to be positive about many of the frontrunners (e.g. Bitcoin and Ethereum). In particular, these options have a longer performance history for investors to look back on. Whilst cryptocurrencies such as these have shown a high level of volatility over the years, the overall trajectory of Bitcoin and other, select cryptocurrencies has been upward. A range of factors may affect which cryptocurrencies you choose to invest in, including:
- Investment outlook. Whilst investors should always take any investment outlook consensus with a pinch of salt, it is useful to gauging investor attitudes towards crypto markets. If these are widely optimistic, then investors may be more prepared to pay a higher price for your Bitcoin investments.
- Global status. Many large, established financial institutions and players have started backing certain cryptocurrencies. Bitcoin, for instance, has now been accepted as a payment method by PayPal, and funds are also starting to invest in it. Whilst certain investors may see this institutional acceptance as against the “spirit of crypto”, it does lend credibility and legitimacy to a cryptocurrency.
- The political climate. At the moment in India, cryptocurrencies are in the government’s line of fire. Such a move is unlikely in the UK or USA any time soon, but that is not to say investors should ignore political factors which may affect how they approach crypto.
- Market factors. Cryptocurrencies like Ethereum need to be “mined” to work. For those which are more decentralised – e.g. powered by PCs in people’s homes – investors will want to factor market forces into their crypto investment decisions. In early 2021, GPUs have seen their prices skyrocket due to miners seeking to buy extensive mining “rigs”, in pursuit of crypto profit. Will suppliers be able to keep meeting this demand? If so, will the price of building a mining rig eventually become unviable?
Other ways to invest in crypto
Of course, investing in crypto does not necessarily mean picking a cryptocurrency and buying it directly (holding it until it rises in price later, and then selling it). There are other options you can consider instead of – or alongside – direct crypto investment:
- Crypto mining. Here, you can build your own mining rig (e.g. using GPUs) and get paid in a cryptocurrency for hashes it completes. The advantage here is that the rig could switch between different cryptocurrencies depending on what the market rates are. This way, if a given cryptocurrency crashes, you have not pinned your hopes on it.
- Investing in companies. You could, of course, invest in companies which invest in the likes of Bitcoin themselves. This allows you to diversify your equities (stocks) portfolio and mitigate some risk, especially if the company has other revenue streams outside of its crypto investments. Another approach, however, is to consider investing in companies which are involved with technologies related to cryptocurrency or blockchain. Here at Bure Valley Group, for instance, we work closely with NexGen Cloud – an innovative, growing business which helps people offer their dormant computer hardware for profit.
Conclusion & invitation
Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:
+44 160 334 0827