Cryptocurrencies are the future. This is a statement that you have probably heard before, and it is true. With Bitcoin and other cryptocurrencies reaching all-time highs, it is clear that this is a trend that is here to stay. If you are an asset manager, you need to start paying attention to this space. In this blog post, we will discuss some of the things that you need to know before entering the cryptocurrency market.
Consider The APY Vs APR For Any Currency
When it comes to digital currencies, one thing that you need to consider is the APY vs APR. The APY is the Annual Percentage Yield and the APR is the Annual Percentage Rate. Both of these are important when you are trying to calculate returns.
However, the APY is more important when it comes to digital currencies. This means that when looking at APR vs APY for Crypto, it’s critical to focus on the yield and not the rate. In this way, you can more accurately compare returns for different digital currencies.
Digital currencies are also much more volatile than traditional investments. This means that there is a higher risk associated with them. However, this also means that there is the potential for much higher returns. If you are an asset manager, you need to be aware of this and factor it into your investment decisions.
Learn About Blockchain
Asset managers should take the time to learn about blockchain technology before investing in cryptocurrencies. Blockchain is the underlying technology that powers cryptocurrencies, and it has a wide range of potential applications beyond just digital currencies. By understanding how blockchain works, asset managers can make more informed investment decisions when it comes to crypto assets.
A blockchain works by creating a digital ledger of transactions. This ledger is then distributed across a network of computers, which verifies and records the transactions. The result is an immutable record of all the transactions that have taken place on the blockchain.
One of the key benefits of blockchain is that it is decentralized, meaning that it is not controlled by any central authority. This makes it resistant to tampering or manipulation, as there is no single point of failure.
Crypto Can Still Be Taxed
Cryptocurrency investors can still be taxed even if their investments are not doing well. This is because the IRS taxes capital gains, not income. So, if an investor bought a cryptocurrency for $100, and it is now worth $90, they would still owe taxes on the $100 gain.
Similarly, if an asset manager is thinking about investing in a cryptocurrency, they should be aware of the potential tax implications. For example, if an asset manager buys a cryptocurrency for $100, and it goes up to $110, they will owe taxes on the $100 gain. However, if the asset manager then decides to sell the cryptocurrency for $120, they will only owe taxes on the $20 gain.
As you can see, there are a number of things that asset managers should be aware of before investing in cryptocurrency. While there are potential benefits to investing in this new asset class, there are also some risks and challenges that need to be considered.
How Are Crypto Currencies Created
Cryptocurrencies are created through a process called “mining.” Mining is how new Bitcoin and other cryptocurrency units are added to the market. Miners use special software to solve math problems and are rewarded with cryptocurrency for their efforts.
The process of mining can be quite resource-intensive, requiring substantial computing power and electricity. As more people get involved in mining, the difficulty of solving these math problems increases, and more computing power and electricity are required.
In recent times, the number of currencies available has exploded, and mining has become more specialized. There are now many different types of cryptocurrency, each with its own mining process and requirements. As such, asset managers should do their research and understand the specificities of the currencies they’re interested in before getting started.
China Is The Biggest Market
China is the biggest market for cryptocurrency trading, with over $24 billion in daily trading volume. That’s more than twice the volume of the second-largest market, South Korea.
Cryptocurrency trading in China has been booming despite the Chinese government’s crackdown on exchanges. The country is home to some of the world’s largest bitcoin and Ethereum mining operations.
Chinese investors have been flocking to cryptocurrency exchanges in droves, in part because of the country’s volatile stock market. Bitcoin and other digital currencies offer a haven for investment during times of economic uncertainty.
The Chinese government has attempted to crack down on cryptocurrency trading several times, but each time the market has bounced back stronger than before. It’s clear that Chinese investors are here to stay in the crypto world. Asset managers should be aware of this when making investment decisions.
Is It Intangible As An Asset
It is often said that crypto assets are intangible and lack the “intrinsic value” of traditional assets such as stocks, bonds, and real estate. This may be true to some extent, but it is important to remember that all assets are intangible to some degree.
For example, a stock represents an ownership stake in a company, but it is merely a piece of paper (or an electronic entry on a computer) that represents that ownership. Similarly, a bond represents a debt that will be repaid by the issuer, but it is also just a piece of paper.
And even real estate can be considered an intangible asset, as it is simply a bundle of rights to use and occupy a piece of land. So, while crypto assets may be more intangible than some other assets, they are not unique in this regard.
In conclusion, asset managers should do their research and due diligence before investing in cryptocurrency. While there are some potential benefits to this new asset class, there are also some risks and challenges that need to be considered. With proper planning and a clear understanding of the market, however, asset managers can successfully navigate the world of cryptocurrency investing.