Posted Sep 26, 2022, 3:00 PMUpdated on Sep 28, 2022 at 12:41 PM
According to a KPMG-Ipsos survey, 8% of French people say they have already invested in cryptos. The innovative side of the placement especially appeals to young people, fans of virtual worlds. They do not always measure the risks associated with this particularly volatile type of investment.
The Web is also full of various and varied scams, the imagination of cyber-crooks being limitless. How to avoid leaving (too many) feathers there?
1. Not investing all your savings
Crypto is an irrational market that is difficult to predict. It is therefore necessary to invest a measured part of one’s savings in it.
“Depending on his risk appetite, the slider of this exposure can range from 1% to 10% of the amount of a heritage”, indicates Pierre Yves Dittlot, president of Ledgcity, a platform which offers cryptocurrency portfolio management mandates.
2. Don’t be in a hurry
The desire to earn quickly and a lot is often the primary motivation of people under 30 when they buy cryptocurrencies. We now have enough history to know that this investment is far from being a calm river.
If this digital currency market is experiencing meteoric rises, it is also recording heavy falls with double-digit losses in a few days, even a few hours.
The crash of last spring was one of the illustrations of the violent reversals of this irrational market. Contrary to a tenacious misconception, cryptos are not assets where “every time you win”.
Its extreme volatility makes it a risky bet. “It is therefore better to approach this investment with the following state of mind: set an amount to invest that you are ready to lose and not try to trade in the short term”, advises Malek Ziane, wealth management advisor at Noun Partners. Then, as on the stock market, it is advisable to aim for an investment horizon of 5 to 8 years, or even more.
3. Select a serious platform
In the world of virtual and dematerialized finance, the holding of digital securities is a crucial subject. How to recover cryptos when the intermediary through which we passed comes to put the key under the door?
The recent setbacks of the Celsius platform show that disaster scenarios are possible. It is therefore better to carefully choose the sites through which the cryptos will be settled, stored and exchanged.
With the rise of this market, online players abound, with scams galore. “A French investor will have every interest in selecting an operator with a so-called ‘Digital Asset Service Provider’ (PSAN) license issued by the AMF. To date, around twenty companies have won this distinction,” advises François-Julien Alacaraz, founder of the Cryptosimple site (see box).
In the event of glitches encountered by this intermediary, backup scenarios are planned to ensure the continuity of the management of client assets. On the other hand, an approval obviously does not protect against price declines, and therefore against possible losses.
4. Do not bet everything on one currency
Cryptocurrencies are extremely numerous (some are created and disappear every day) and evolve in a highly correlated market. Nevertheless, it is better to diversify your bet on the ten most liquid currencies on the market, that is to say with the highest capitalizations. There are certainly star currencies such as bitcoin, ethereum and stablecoin. But that’s not all ! Ripple, cardano, solana are quite widespread and deserve their place in a portfolio.
The reason for this mix? This limits losses if one of these “currencies” dips. Because a mishap is always possible. Last May, the crypto luna crashed losing more than 99% of its value. Four months later, its price rose but remained low: in mid-September, it stood at 0.0004 dollars against 86 dollars in May and 120 dollars in April.
5. Invest small and regularly
Like investments on the stock market, the purchase of cryptos must be carried out over a long period. And many specialists advise to invest very small amounts, regularly and over a long period. This savings strategy allows you to surf the ups and downs and to buy at different market levels. With this discipline, the average price will be smoothed out.
To help neophytes to invest in a “fun and simple” way, the fintech Bitstack offers to buy bitcoin using the mechanism of automatic rounding of its expenses. Free, this mobile application allows each sum debited (payment with his card, direct debits, invoices) on the bank account of his choice to be rounded up to the next euro to feed a kitty.
Example: a coffee paid for 2.60 euros with its card is rounded up to 3 euros and the 40 cents are immediately set aside. Each week, this pocket of savings is used by Bitstack to buy, on behalf of the investor, this cryptocurrency. These are rounding up a few cents but after a week, we quickly arrive at a total sum of 10 to 15 euros.
Registration or licensing?
Please note that the checks for the registration of a digital asset service provider (PSAN) relate to the quality of its managers and compliance with the rules relating to the fight against money laundering.
The fact that a PSAN is registered with the AMF does not provide investors with any specific guarantee or protection. Authorisation, on the other hand, implies protection comparable to that applicable to other investment products.
