Questions about investing in cryptocurrency
Why should I invest in cryptocurrency?
An investment in cryptocurrency is according to us an investment in a new asset class. Crypto assets use the underlying blockchain technology. Blockchain has the potential to transform and improve multiple aspects of the global economy. These aspects are related to elections, supply chain, financial services and charity.
An investment in cryptocurrency ensures that you are part of the technological innovation caused by blockchain. Cryptocurrencies are a tool to transfer value within the blockchain ecosystem.
What amount should I invest in cryptocurrency?
The volatile nature of cryptocurrency makes it possible to achieve both big gains and large losses.
It is therefore responsible to invest an amount that you are willing to lose as large losses can occur in a relatively short period of time. It is important to be assured of a good night’s sleep if the return has been -50% in the past month.
All in all: invest an amount that you are able to miss for a longer period of time and that allows for high risk investing. Scientific research by Yale shows that an investment in cryptocurrency is ideally a percentage between 1% to 6% of your total liquid assets.
How long should I invest in cryptocurrency?
An investment in cryptocurrency is one for the long term. Good years are followed by bad years and as a result timing is important. Timing of an investment is always difficult, extending the investment horizon ensures that the impact of good and bad years are somewhat neutralized thereby resulting in profitable long term returns.
The combination of a long term investment horizon in combination with a maximum percentage of the total wealth that is invested in cryptocurrency is the solution. The percentage of total wealth invested in cryptocurrency rises with price increases. Cryptocurrency is sold in that case to return the percentage to the ideal long-term percentage. The other side is that cryptocurrency is bought after prices have decreased. As a result cryptocurrencies are in the long term bought relatively cheap and sold relatively expensive.
What are the risks of investing in cryptocurrency?
The risks of an investment in cryptocurrency are large. It is possible to lose your entire cryptocurrency wealth.
Risks of investing in cryptocurrencies can roughly be divided in two categories: general investment risks and specific risks of cryptocurrencies.
General investment risks
Market risk – in line with the general global economy and status.
Price risk – arises from the emergence of new competing technologies or by disappointing future prospects.
Currency risk – when investing in currencies other than euro (thereby including cryptocurrency).
Market and political risks – global law and regulatory developments related to cryptocurrency may have a negative impact.
Custody risks – the blockchain (which registers the cryptocurrencies) may be hacked.
Pre (ICO) risks – in case of an investment in a (Pre) ICO, it is possible that a project is never launched or that certain assets are never received by the investor.
What is the expected return of investing in cryptocurrency?
An investment in cryptocurrency allowed for significant returns in the past.
Looking ahead, in valuing cryptocurrency complexity arises as cryptocurrencies have no real underlying value. The process of valuing cryptocurrencies is therefore different than the valuation process of stocks, bonds and real estate. Alternative methods are developing to value cryptocurrencies. We will discuss some of them below.
- Risk versus return
An option is to compare the risk and expected returns of cryptocurrencies compared with other asset classes (stocks, bonds or real estate).
- Total addressable market for medium of exchange and store of value
It can be argued that (for example) Bitcoin can serve as a future medium of exchange or store of value. A medium of exchange will serve as a payment in daily life. Bitcoin as a store of value will serve as digital gold.
The next step is to determine the total available money supply and to divide the supply in certain aggregates. The money supply aggregates vary from M0 (highly liquid money such as bank notes) to M3 (including equity in money market funds and debt securities with a maturity up to two years). M0 and M1 are allocated to use as a medium of exchange and M2, M3 and investment gold are used as a store of value. These markets are combined valued around .000 billion. The current (as of November 2018) market capitalization of 0 billion shows that there is upside potential.
- Transaction multiples
Transaction multiples in cryptocurrency are comparable with the price-earnings ratio in equity investing and are calculated by dividing market capitalization with the total daily transaction value. The transaction value provides an indication of the obtained utility by the users of the platform. The logic behind this reasoning is that users only execute a transaction when it will provide utility to them. Applicability of the transaction multiples is currently limited There are currently a lot of (blockchain) transactions speculative
- Network valuation model
The network valuation model is derived on the value creation of telecommunications and social media. This model shows that the value of a network is proportional to the number of users squared. Every person or company that uses Bitcoin adds value to the network because everyone in the network benefits from the addition of a single user.
There are multiple ways to calculate the value of cryptocurrencies and thereby deriving an expected returns. Based on our research and analysis we have a target return of +50% per annum for our cryptocurrency portfolios. This target return is a return for the long term where volatility is to be expected.
I’m invested in cryptocurrency already. Is it still possible to become a client of BlockBay Capital?
This is possible after consultation with us. Contact us for more information.
Questions about BlockBay Capital
Who is BlockBay Capital?
BlockBay Capital is founded in March 2018 and is the first Dutch blockchain and cryptocurrency wealth manager. BlockBay Capital invests on behalf of it’s clients in a safe and convenient way in cryptocurrency. The amounts invested by clients vary from an investment of €2,500 in BlockWealth Lite to investments greater than €100,000 as a result of the BlockPro services.
Learn more about BlockBay Capital?
What is the minimum investment amount with BlockBay Capital?
The minimum investment amount with BlockBay Capital is €2,500 and is invested in BlockWealth Lite. With BlockWealth Lite you invest in a convenient way in fifteen different cryptocurrencies selected on basis of market capitalization. BlockWealth Lite is the perfect way to start investing in cryptocurrency.
How does investing with BlockBay Capital work in practice?
We make an agreement after we agreed on your cryptocurrency investment. We consider it extremely important that an investment in cryptocurrency fits within your personal situation. After signing the agreement you will receive the deposit bitcoin address of BlockBay Capital. If you are currently not yet in the possession of Bitcoins, you can purchase them from an external party (under the supervision of BlockBay Capital). It is not possible to transfer euro’s to BlockBay Capital. After receipt of the deposit, the cryptocurrency investment is structured according to the desired investment strategy.
Every month you receive a comprehensive report about your cryptocurrency investments. During the month you stay informed about the development of your investment.
What are the fees of BlockBay Capital?
BlockBay Capital charges an all-in fee calculated as a percentage of the invested amount. The all-in fee covers all expenses related to the set-up of the portfolio, portfolio management, custody and monthly report. If applicable, VAT will be charged on the all-in fee. In addition to the all-in fee, it is possible that external transaction costs are incurred when trading on external trading platforms. These costs are processed in the buying and selling price of the cryptocurrency.
Is it safe and convenient to invest with BlockBay Capital?
Investing with BlockBay Capital is safe. The years of experience that the BlockBay Capital team has with investing in cryptocurrencies is formulated in strict procedures that ensure that your cryptocurrencies are safe. In addition, trust and discretion are self-evident to us.
Is it possible to visit BlockBay Capital?
We would be delighted to invite you to our office. In consultation with us is it also possible to schedule a visit at your location. Please contact us to schedule a visit.
What kind of registrations and licenses does BlockBay Capital have?
BlockBay Capital adapted and implemented the Asset Manager Code of Conduct from the CFA Institute. The code of conduct is accepted by investors globally. The code of conduct is voluntary and helps asset managers practice ethical principles that put client interests first. BlockBay Capital is, among other things, obliged to put the clients interest first, to make well-informed investment decisions and to manage operational risk.
BlockBay Capital is currently not registered with the Dutch AFM because cryptocurrencies do not fall within the scope of supervision. Further developments are soon to be expected at the European level. BlockBay Capital closely follows relevant developments in order to stay in compliance with all relevant laws and regulations.