Cryptocurrency: how to invest prudently in this asset class?

After the recent explosion of cryptos in 2020 and 2021, the enthusiasm of investors for digital currency should not weaken in 2022. But how to secure your bet as much as possible by positioning yourself on it? We take stock.

Although past performance is not indicative of future performance, the crypto market undoubtedly harbors attractive investment opportunities. It's not yet too late to jump on the bandwagon, as there are so many innovations. However, it is advisable to be vigilant and to be well informed before investing as this asset class is volatile. Overview to invest well in a cryptocurrency without losing your woolen stockings.

Start with the least volatile

Why not start with the stablecoin? As its name suggests, it is a cryptocurrency that is not very subject to variations and which perfectly wards off the high volatility of other cryptos. Indeed, it is not uncommon, when the market is bearish, to see a cryptocurrency fall by 20% in a single day. If you hold a stablecoin backed by the dollar for example, you are unstoppably securing your digital assets. On the other hand, if the market continues to soar, you will not benefit from the capital gains inherent in the upheavals of the markets in Bullish periods (periods of increase). Your price will remain stable.

There are mainly three types of stablecoins: the "FIAT stablecoin" (the FIAT is assimilated to the dollar or the euro); the “unsecured stablecoin” (i.e. supported only by its value, thanks to a “smart contract”, a contract structured by the Blockchain); and the “crypto-collateralized stablecoin”, backed by a strong cryptocurrency, such as bitcoin.If this cryptocurrency offers few surprises, it allows you to invest with (a little more) peace of mind. Know that in general, seasoned retail investors use it a bit like a waiting room while waiting for a market opportunity (after a drop, for example). Ultimately , the stablecoin offers security and prepares its integration into the real economy in the short term through merchants, who will soon accept it in their payment systems.

Invest little and diversify...

After arousing much reluctance in the hushed world of finance and banking, institutional investors have now embraced digital currency. This makes it unavoidable, to the chagrin of central banks, who are now thinking of creating their own coins, with a considerable delay. However, you have to use common sense and good judgment and only invest the money you can lose.

It is therefore advisable to bet small amounts at the start, in order to gradually become familiar with this type of investment. For those who are more comfortable in the financial markets, but still have a bit of an interest in this sector, an ETF replicating the Nasdaq 100 may be the right way to indirectly invest in the growth potential. cryptocurrencies, NFTs and ongoing ICOs.

Finally, and this is the corollary of this first point, it is good management not to forget to diversify your investments, so as to limit the risk in the same portfolio. Crypto has its place alongside investments such as real estate, gold, stocks, passbooks, life insurance and retirement savings, for example.

… in the rules

About twenty platforms are currently registered with the AMF. We mainly find among these Coinhouse, Paymium, StackinSat Bitcoin Avenue or Litebit. However, these are not necessarily the platforms most used by most French people. Many investors have chosen to turn to international platforms, such as Coinbase, Binance or Kraken. These are already well established, but find out what they offer – the services vary – and especially their prices. And for the others, check with the AMF which ones are already part of its blacklist .

Currently, Binance and the French authorities are in talks for the platform to obtain its approval in France. Moreover, the famous Chinese platform has decided to invest 100 million euros in the creation of an R&D department in France dedicated to blockchain, in partnership with France Fintech and Ledger. Undoubtedly the beginning of a beginning of warming between the two entities.

Favor an already well-known cryptocurrency

If there is a plethora of cryptos, positioning yourself on the best known also makes it possible to limit certain risks. In particular their resistance to market shocks, or even unpleasant surprises as to their operation, which is sometimes very complex.

• Bitcoin (BTC): Created by the mysterious Satoshi Nakamoto, Bitcoin is the most famous cryptocurrency. Since its origin, bitcoin will not be able to exceed the volume of 21 million units. This limitation leads each year to the craze of the crowds and an increase in its value in parallel, not without jolts.

• Ethereum (ETH) : This is undoubtedly the second most famous cryptocurrency. It is based on a decentralized exchange protocol where users can set up smart contracts. Thus a user can establish a future contract stipulating that he will buy something only under suspensive conditions, without having to go before the notary. In 2022, Ethereum should go into version 2, which should, if successful, add a very strong value to it.

• Solana (SOL): It is the cryptocurrency that is rising at the moment by coming to compete with its big sister, Ethereum with lower fees. In addition, it has faster action times.

• Terra (LUNA): It is one of the ten largest cryptocurrencies by market capitalization. The idea here is to power the cryptocurrency market with blockchain technology. Thus Terra Money offers instant payment for the merchant coupled with discounts on purchases, via its platform.

• Avalanche (AVAX): This platform deploys smart contracts via subnets. Crypto is ultra-fast and very “scalable” (ability to process the most transactions without affecting performance). It has thousands of producer nodes while integrating Ethereum development tools.