Three top tips for investing in Bitcoin from a cryptocurrency boss

A cryptocurrency boss has given his three top tips for investing in the likes of Bitcoin.

Since early April, Bitcoin has dived from $80,000 to $50,000 now, losing value as the Australian share market this week hit record highs.

Little more than a year ago, one Bitcoin was worth just $13,000.

It surged during the pandemic and peaked as American billionaire Elon Musk flip-flopped on accepting the cryptocurrency as payment for his Telsa electric cars – citing environmental concerns about high-powered computers.

Jeremy Ng, the Singapore-based Asia-Pacific managing director of cryptocurrency trading platform Gemini Trust, said volatility was to be expected considering this type of asset had only been around for 13 years.

‘We should take a step back and realise that cryptocurrencies as an asset class is still relatively young,’ he told Daily Mail Australia.

‘Like any asset class when they’re maturing, the volatility will also slowly decrease.’ 

Bitcoin, created in 2008 as a store of value, has a market capitalisation of less than $900million, compared with $14.5trillion for gold. 

But Mr Ng predicted Bitcoin as the dominant cryptocurrency would one day surpass gold as institutional investors like big companies dominated the sector instead of individuals trying to get rich quick.

‘Gold started as a medium of exchange but nobody’s using gold as a medium of exchange anymore,’ he said.

‘It has become a store of value, that’s how I look at Bitcoin as well.

‘It was built to be a form of transaction but as it evolved, there’s a stronger characteristic Bitcoin is like gold to become a store of value.’

Cryptocurrencies are also following a similar trajectory to early online sales giants like Amazon during the early 1990s.

‘This is like investing in the internet in the early 90s,’ Mr Ng said.  

‘That is exactly how we look at cryptocurrencies: it is the new internet, it is Web 3.0.’ 

Invest over four years

Mr Ng said cryptocurrency needed to be considered as a longer-term investment, advising market players to have a four-year strategy.

‘Take a long-term view and see it grow overtime,’ he said.

During the past decade, despite the volatility, cryptocurrencies have delivered average annual returns of 20 per cent, more than double the 9 per cent gain for shares.

‘While Bitcoin is more volatile than equities or bonds, but the return is also higher,’ Mr Ng said.

‘It gives you a very different perspective on how to look at this asset class.’ 

Only dedicate 3 per cent of your portfolio to cryptocurrencies 

Someone investing $10,000 is advised to only dedicate 3 per cent of that to cryptocurrencies, which works out at $300. 

‘Don’t invest more than you can lose,’ Mr Ng said.

‘Start small: start with say 3 per cent to 5 per cent allocation. 

‘As you learn more, then you can slowly increase it to 5 per cent to 10 per cent.

‘The key is really, don’t look at it as get rich fast.’ 

Invest in cryptocurrencies with a specific purpose

While Bitcoin is a store of value, Ethereum is a new benchmark alternative to business banking, known as decentralised financing.

‘Not all cryptocurrencies are the same. They’re not all created the same,’ Mr Ng said.

More than 700 different types of cryptocurrencies are in existence but not all of them are going to dominate the market if they lack a specific purpose.

‘There are a lot of these coins that you and I have not even heard of before,’ Mr Ng said.

‘Just like companies, not every single one is going to survive in the long term.’