Cryptocurrencies: how to invest without mistakes

In mid-May, bitcoin fell below the $30K level, a far cry from the highs of November 2021, when the most popular crypto asset topped $67K. It is an understatement to say that the world of cryptocurrency is unstable! Since the crash in early May — within a week, bitcoin lost $12,000 — observers have been furious. Some see this brutal fall as announcing the end of the speculative bubble in crypto assets, while others believe that the situation offers a good entry point into this market. One thing is for sure: investing in these products cannot be improvised.

The decline observed in recent weeks provides an opportunity, after a boom period that led to excesses, to remember some basic guidelines. Given the youth of this industry, its poor regulation and many doubts about its development, savers should venture into it with the greatest caution.

This results in limited bets. “You should only invest money that you are willing to lose completely,” warns Pierre-Yves Dittlot, founder of Ledgity, a new digital platform for investing in crypto assets. According to wealth management professionals, cryptocurrencies should not exceed 2% of wealth, or even 2% of financial wealth (excluding real estate) at most. So the amounts can vary depending on each person’s assets, but also their personal education on the subject. “You should invest according to your intellectual education and your degree of knowledge of the ecosystem,” recommends Carl Toussaint de West, wealth management consultant and co-founder of Netinvestment.

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3701_tables_placement_crypto_essai_V2

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progressive investment

Another tip: to get started, you need to rely on a progressive investment strategy. In a highly changing market, it is best to avoid investing everything at once. “Some players, such as StackinSat and Paymium for example, offer services to make regular purchases every day, every week or every month,” notes Louis Alexandre de Froisard, director and partner at Montaigne Conseil & Patrimoine. Thus StackinSat offers a Bitcoin savings plan, accessible from €10 per month. All you have to do is set up automatic conversion. Once the tool is configured, there is nothing else to do.

Finally, of course, adopt a long-term strategy. If cryptocurrencies are the world of speculators, they brag about their gains more than their losses! Additionally, “to have a short-term strategy, you have to be a knowledgeable trader, warns Carl Toussaint de Waste. You have to be behind your computer screen 24 hours a day, it’s a high-level sport.” Like investing in the stock market, this approach is for highly informed investors. Others will rely on safer methods. As a result, there is no need to sift through niche sites all day long. “The trap is to constantly watch prices and let your emotions take over, assures Karl Toussaint du Wast. It’s best to choose a five to ten year goal and stay on track without giving in to market moves.”

reliable provider

Provided these recommendations, it is still necessary to pass on to the practice. The first thing you need to do is to find a reliable provider to buy your cryptocurrency. In fact, there are many tricks. The Financial Markets Authority (AMF) also maintains a blacklist of banned websites operating on the Internet, containing more than … 200 names! Since December 2019, platforms providing services to French individuals must adopt the digital asset service provider (PSAN) status defined by the Pacte Law. To do this, they must be registered with the AMF. The names of PSAN players can easily be found on the AMF website. Among the first players to start the business are Coinhouse, Bitpanda, StackinSat, Comptoir des cybermoines, etc.

The list has grown over the years and now includes the Chinese giant Binance, the latter of which received its registration on May 4. “PSAN status is a guarantee of confidence, assures Paul Bourceret, Director of Commercial Operations at Coinhouse. Accounts are audited and the platform cannot refuse a withdrawal request. And the manager is not in danger of leaving with the fund!” In addition, in the event of a dispute with the broker, the AMF broker is competent to intervene only if the offending financial brokers are registered. This precaution is taken, it is then necessary to navigate the different platforms and measure their ease of use, check whether the services offered meet expectations …

50 Biggest Caps

All that remains is to do! “It is not easy to invest in this new world,” notes Michael Sves, partner at wealth management firm Kermony Office. There are over 17,000 different cryptocurrencies and more are disappearing every week. The easiest way to get started is to focus on Bitcoin. It is the largest and oldest cryptocurrency. Its capitalization currently accounts for more than 40% of the market. It is then possible to expand to the second most important cryptocurrency: ether. These two codes are essential.

For more diversification, you need to be careful. For security reasons, it is better to limit yourself to the top 50 capitals. After that you will find food and drink. “We offer 45 cryptocurrencies in Coinhouse that are compatible with a distinct blockchain and every project is different,” says Paul Purseret. So we should study it and see if we agree or not. It’s a job quite similar to that of an investor in the stock market. “If you want to diversify your portfolio, you will hold 70-80% on tokens like bitcoin and ether,” continues Paul Bourceret. For balance, Solana and Cardano cryptocurrencies are among the most popular.

Of course, completely new encryption will offer much higher performance potential, but the risk comes with it. According to Louis Alexandre de Froissard, it is possible to hope to earn 5 to 15% annually on average in the long run by limiting yourself to tokens. Paul Bourceret agrees, “As the market matures, triple-digit performance is scarce.”

One option is to resort to ready-made portfolios. Coinhouse, for example, offers a management service that is managed according to three levels of risk. Of course, this has a cost. Calculate a 1.2% entry and exit fee, a 2% annual management fee plus a performance fee if the portfolio is above its goals.

Cryptocurrency nursery

There is still one point that should not be overlooked: preserving your assets. In a world that advocates decentralization, logic encourages you to hold cryptocurrencies yourself. To do this, you must open an online wallet (hot wallet) or purchase a cold storage tool (cold wallet). Ledger is the champion in this field. The object is a kind of encrypted USB key that is not connected to the Internet. This is the most secure way to protect against theft and other hacking attempts.

These tools work, on the one hand, with a public key, which allows the platform to identify you and deposit newly obtained cryptocurrencies, and on the other hand, a private key. The latter is your password to access your crypto capital. “Not everyone understands what this means in terms of liability, warns Faustine Fleuret, president of Adan, which brings together players in the crypto and blockchain sector. Your password and cryptocurrency are permanently lost.” In fact, there is no security. It is estimated that the number of lost bitcoins represents 10-15% of the market. “You have to write your private key down on paper and store it in at least three different places,” recommends Louis Alexandre de Froissar.

If this scares you, know that most platforms offer custody service. In this case, it is these brokers who manage the private keys. If purists are hesitant about this method, thinking that you don’t really own the cryptocurrency, this solution has the advantage of simplicity for stunned savers.

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As long as bitcoins and ether remain in your wallet (or that of your broker), you will not incur any taxes. The same if you exchange bitcoins for other cryptocurrencies. Louis Alexandre de Fruissar points out that “for a normal person, it is only when you sell your cryptocurrency in euros or when you offer it as collateral for a loan that you are obligated to declare capital gains.” In this case, you’ll be subject to the 30% flat tax, including 12.8% income tax and 17.2% Social Security contributions. Capital gains are tax-free if sales do not exceed €305 per year.


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