This There’s no denying that investing in cryptocurrencies like Bitcoin and Ethereum has proven to be a profitable choice. Even after the latest pullback in the crypto market, the overall cryptocurrency market has significantly outperformed other investments. As a result, many investors have focused on the crypto space and have been keen to include cryptocurrencies in their portfolios.
The problem is that the crypto market has been dominated by speculators. Those who bought individual cryptos hoping to make a quick buck instead of taking a professional and more sensible approach to crypto investing. Financial advisors and wealth managers plan to invest in cryptocurrencies the same way they invest in stocks – by investing in a low-cost, diversified basket or set of top-performing cryptocurrencies.
The idea is to invest across multiple cryptos so that a price drop of just one does not significantly reduce the overall profitability of your portfolio. This strategy captures the essence of investment portfolio diversification and forms the foundation for investing in all other investment categories.
The primary objective of every investor is to maximize profits while minimizing risk, which is why we set investment goals, diversify our portfolios and employ a variety of strategies to capitalize on market trends – such as growth of a certain country, market, asset class or sector.
How do we start?
Most people are too focused on being on the right track, but never stop to wonder if they are even on the right track.
There has been a lot of hype around individual cryptocurrencies, but have you thought about the big picture – exposing yourself to different sectors of the crypto space. Just like you do when investing in the technology, resources or real estate sectors of the JSE.
Wait, there are sectors in the crypto market?
Yes, there are clear and very distinct sectors within the cryptocurrency market in which we can invest.
The most established sectors are:
- Smart contract platforms,
- payment coins, and
- Decentralized finance (DeFi) applications.
Remember that not all cryptocurrencies are trying to become digital money. Only payment coins try to do this. The term cryptocurrency can be confusing for this reason as it insinuates that all blockchain-based projects are trying to create a new form of value transfer. It is for this reason that you will often hear diehard crypto fans talking about cryptoassets rather.
Let’s forget Solana, Cardano, Polkadot and all the rest for a minute and take a step back.
Many experienced investors use what they like to call a “top down” approach when considering what to invest in, so let’s start there.
Traditionally, a “top down” approach is exactly what it sounds like. We take the whole investment market and drill down into the industries/sectors of the market and then down to the individual stocks (or, in this case, crypto) that we want to invest in.
For the crypto world, if we start by defining the “top-down” structure, we should start by asking ourselves some important questions:
Which of these sectors is performing the best?
Over the past year, the smart contracts sector has captured global attention, with the sector producing 12-month returns of +111%. This is mainly because smart contracts have started to pave the way for many other blockchain-based applications like DeFi and NFT.
DeFi comes next with an overall sector performance of +33% over the past year.
The payments industry is in third place and is starting to gain momentum as more names like PayPal, Visa, and Google are starting to get involved in decentralized crypto payments and are trying to integrate blockchain technologies in their offers.
Let’s dive into the smart contract industry
Smart contracts have been a game-changer in the cryptocurrency market and created one of the biggest industries in crypto, DeFi.
A smart contract refers to a computer program that lives on the blockchain.
These programs perform or automatically perform specific actions when predetermined conditions are met. Think of it the same way you put money in a vending machine to buy a product. The seller defines the conditions under which the article is released. The buyer pays what is required, after which the item will be released to them. You get your soft drink and the seller gets their money, no need for a third party to see if the conditions have been met or monitor the transaction.
Smart contracts are taking the crypto space by storm as they are increasingly used. Popular names like Terra (+2,941%) and Solana (+2,021%) have produced extraordinary returns over the past year. Even Cosmos, which sits at the bottom of this chart, posted a return (+185%) that was able to beat the S&P 500 (+18.18%) and JSE Top 40 (+18.39%) by a slip. ground.
Cash coins are cryptocurrencies that seek to revolutionize money transfers and the way value is transferred using their own blockchain and cryptocurrency as a means of payment. The ability of a blockchain to transfer value across the internet instantly and unstoppably has led to the creation of coins such as Bitcoin (BTC), Ripple (XRP), Litecoin (LTC), Stellar (XLM), and Bitcoin Cash ( BCH).
Money in its simplest form has three basic functions to perform: it should be a medium of exchange, a unit of account and a store of value. Cash coins are considered digital currency because they can perform all three of these functions as well as, if not better than, fiat currencies.
Cash coins not only meet the criteria to be considered digital currency, but they can also be considered hedges against inflation, something fiat currencies struggle to do. If you look at the five-year annualized return of Revix Payment Package, which offers exposure to the largest payment-focused cryptocurrencies, it is up +150%. This can certainly be considered a major advantage of payment coins over traditional fiat currencies.
The two winners in this sector are Ripple and Bitcoin, with +19% and +12% returns respectively.
Although the recent performance of this sector may be worse than others, the fundamentals of every cryptocurrency project remain the same – the world has a clear and growing need for better payment systems. For an investor with a long-term view, the recent decline in the performance of this sector may signal an excellent buying opportunity.
DeFi is a sub-sector of the cryptocurrency industry challenging traditional financial institutions. This includes banks, insurance companies, and stockbrokers, as well as places where entrepreneurs build semi-automated trading and lending systems on top of blockchain networks.
2021 ushered in a new era of DeFi innovation and constant building. DeFi token returns held steady, with the likes of CAKE up +278% for the year.
Although DeFi is a revolutionary industry, it still finds its bearings by tiptoeing around complying with regulations. Perhaps that’s why it didn’t quite compete with smart contracts this year.
So, are crypto sectors beating standalone cryptocurrencies in every sector?
Remember that the sectors above were based on winners only. While these returns may look better than an index, you should have had the foresight and knowledge to pick these winners a year ago and stick with them. An index offers a way to retain winners while automatically reducing your volatility and overall investment risk in an already high-risk category.
We can see from the chart above that in each sector the index beats its single cryptocurrency counterpart.
All while reducing investor volatility and automatically keeping them up to date with the rapidly changing world of crypto.
But where can I get exposure to these crypto industry bundles?
Cape Town-based crypto investment platform Revix is backed by JSE rated Sabvest and offers something unique for you, the investor. You can either invest in standalone cryptocurrencies – like Bitcoin, Solana, Ethereum, Uniswap, Cardano and more – or stand out from the crowd by investing in diversified loans”Crypto packageswhich resemble ETFs.
Their crypto packs allow you to effortlessly own an equally-weighted basket of the world’s largest and, by default, best-performing cryptocurrencies without having to create and manage a crypto wallet yourself. Revix currently offers three Bundlesnamely the Top 10 Bundle, the Payment Bundle and the Smart Contract Bundle.
the Top 10 packs is like the JSE Top 40 or S&P 500 for crypto and provides equal weighted exposure to the top 10 cryptocurrencies that make up over 85% of the crypto market.
the payment package offers equal weighted exposure to the top 5 payments-focused cryptocurrencies that seek to make payments cheaper, faster, and more global.
the Set of smart contracts provides equally weighted exposure to top 5 smart contract-focused cryptocurrencies like Ethereum, Solana, and Polkadot that allow developers to build apps on top of their blockchains, similar to how Apple builds apps on top of their blockchains. above its operating system OS.
Revix brings simplicity, trust and excellent customer service when investing in cryptocurrencies. Its easy-to-use online platform allows anyone to securely own the world’s best cryptocurrencies with just a few clicks. Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own wallet but can access support from the Revix team at any time.
Remember that cryptocurrencies are high risk investments. You should not invest more than you can afford to lose, and before investing please consider your level of experience, your investment objectives and seek independent financial advice if necessary.
This article is intended for informational purposes only. The views expressed are opinions and not facts and should not be construed as investment advice or recommendations. This article is not an offer, or the solicitation of an offer, to buy or sell any cryptocurrency.
To find out more visit www.revix.com.