The pros and cons of my personal cryptocurrency experience

The pros and cons of my personal cryptocurrency experience

For years, I worked in investment banking in London, before working as a financial and wealth advisor in banks in Ireland, writes Nick Charalambous.

Now, at Alpha Wealth, which was set up five years ago, we manage €500m of client assets.

I followed cryptocurrencies for two years, but, because I deal in regulated investments — the type of investments that come with warnings — I had stayed away from cryptocurrencies, until a few weeks ago.

It is hard to say what causes cryptocurrencies to go up or down on any given day. In recent months, Bitcoin, and other cryptocurrencies, have exhibited classic signs of a speculative bubble, with millions of ordinary investors flooding into the market, in hopes of making an easy buck.

That has pushed Bitcoin to new heights, but it has also heightened its significant volatility.

Bitcoin is only one of 2,000 cryptocurrencies. Those in the know would flash names like Ripple or Qash. I couldn’t honestly say anyone has a clue as to which cryptocurrency will ultimately fare best in this amusement park.

Many people run a mile from these as an investment, as they don’t understand them. Although I have a level of understanding, I was intrigued when I started researching what some people would say is a new type of pyramid scheme.

I decided, as had a few of my clients, that it might be worth a punt to buy an amount of cryptocurrencies. I stuck €5,000 of Alpha Wealth’s money into them. The main issue is which platform to use to buy, and it is complex. Unlike traditional shares, for which you can set up an account in minutes, cryptocurrencies are traded on different exchanges. This proved more difficult, as did the time it took for funds to clear.

Having selected a cheap platform — some websites advertising to grant you access to the cryptocurrencies will charge excessively — the account I chose was with a company called Degiro. I had used them previously to purchase shares, and they were cheap, but the process of setting up a company account was so arduous that I gave up after a week.

I turned my attention to setting up a personal account and, having done extensive research, opted for a company called Coinbase.

I chose them with an endorsement from a colleague who had read all the reviews; their fees; customer feedback.

Coinbase provided access to four of the top seven cryptocurrencies — Bitcoin/Bitcoin cash/Litecoin and Ethereum.

I lodged €1,000, an amount I felt I could afford to lose in this experiment. The money miraculously cleared the same day, even though the site said it would normally take up to three days. I felt the omens were good.

Coincidently, I spoke to someone setting up an account with the same company, around the same time, who had been waiting nine days for their funds to clear. There is an issue with Coinbase’s clearing system, due to the volume of transactions.

Armed with €1,000 of cleared funds, I proceeded to buy €250 worth of Bitcoin, Bitcoin cash, Litecoin, and Ethereum. I liked the idea of diversifying and I felt four was better than one. To my slight disappointment, Bitcoin cash was not available to purchase. No reason was given.

I opted for the three available. These purchases took place around January 9, and there had been a fall over preceding days, so I was at least satisfied that I didn’t buy at the top of the market.

I invested not to make a 16-fold increase, which Bitcoin has returned over the last year.

I set a more modest 20% return and set a timeframe of 12 months.

This, for the risk, was a suitable return, and one I would be pleased to make for any investor.

I am three weeks into the experience and I have learnt a lot, despite the fact that, at the time of writing, the main cryptocurrencies’ price movements have fallen, on average, over 35%. Bitcoin is down roughly 50%, from its high of $19,000 in mid-December.

I can only think of Warren Buffett, who said: “In the business world, the rear-view mirror is always clearer than the windscreen”.

Perhaps time will tell as to whether I have made the right decision, but I am quietly happy that my original €5,000 didn’t proceed. Now, back to the day job.

- Nick Charalambous is managing director of Alpha Wealth and Alpha Health.

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