About Crypto: What are Cryptocurrencies?

Cryptocurrencies are digital currencies that work as mediums of exchange through computer networks without relying on governments or banks to uphold, maintain, or regulate them.

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About Crypto: What are Cryptocurrencies?

Building the right tech stack is key

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How to choose the right tech stack for your company?

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What to consider when choosing the right tech stack?

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What are the most relevant factors to consider?

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What tech stack do we use at Techly X?

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Building the right tech stack is key

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  1. Neque sodales ut etiam sit amet nisl purus non tellus orci ac auctor
  2. Adipiscing elit ut aliquam purus sit amet viverra suspendisse potent
  3. Mauris commodo quis imperdiet massa tincidunt nunc pulvinar
  4. Excepteur sint occaecat cupidatat non proident sunt in culpa qui officia

How to choose the right tech stack for your company?

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What to consider when choosing the right tech stack?

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  • Neque sodales ut etiam sit amet nisl purus non tellus orci ac auctor
  • Adipiscing elit ut aliquam purus sit amet viverra suspendisse potenti
  • Mauris commodo quis imperdiet massa tincidunt nunc pulvinar
  • Adipiscing elit ut aliquam purus sit amet viverra suspendisse potenti
What are the most relevant factors to consider?

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What tech stack do we use at Techly X?

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Cryptocurrencies have gone from relatively unnoticed to some of the most popular asset classes for both retail and institutional investors. Back in 2012, two pizzas were bought for 10,000 Bitcoins. Today, those same Bitcoins would be worth roughly $150,000,000.00.

Let’s explore more about this asset class. 

What is Crypto?

Cryptocurrencies are digital currencies that work as mediums of exchange through computer networks without relying on governments or banks to uphold, maintain, or regulate them.  Some examples include Bitcoin and Ethereum. 

Unlike regular currencies, which can be exchanged during both online and physical transactions, cryptocurrencies are only exchanged digitally via lines of code. 

Traditional currencies have legal tender status, meaning that they can be officially recognized as a country’s medium of exchange and must be accepted as payment of a debt. Cryptocurrencies do not have legal tender status and are rarely used in day-to-day transactions to pay debts or make purchases.

Records of cryptocurrency coin ownership are stored in digital ledgers or databases that use strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership.

Cryptocurrencies are viewed as distinct asset classes rather than traditional money to be used for exchanges.

Terms to Know

  • Blockchain

A decentralized digital ledger, blockchain technology allows users to obtain, sell and invest in digital assets, like cryptocurrencies.  A blockchain requires entries to be confirmed and encrypted via an advanced encryption technique called cryptography, which makes the entries very difficult to change or hack. 

  • Digital Wallet

Wallets are software programs that allow people to “store” their cryptocurrency by storing various components of cryptocurrency transactions - such as private keys, public keys, and addresses - that allow the user to access the currency. These wallets come in many forms, including web-based, desktop, mobile, paper, and hardware.

  • Fiat Currency

Any currency declared by a government to be legal tender.

  • Stablecoin

A digital currency that pegs its value to an external reference, typically the U.S. dollar.

  • Cryptography

Guarantees the security of the transactions and the participants, independence of operations from a central authority, and protection from double-spending.

  • Smart Contracts

Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss. 

  • Non Fungible Token

A unique digital identifier that cannot be copied, substituted or subdivided. It is recorded in a blockchain, and is used to certify authenticity and ownership

Why Invest in Cryptocurrencies?

Advantages

Upside: One of the most common reasons investors turn to crypto is because of speculations surrounding the future value and importance of these assets. Over the last few years, the value of certain coins has increased a thousand, and even ten thousand fold. And that upward trend makes the cryptocurrency market so lucrative to investors.

While risks associated with cryptocurrencies are relatively high, the upside is that the potential rewards you can reap are equally high and can be realized in weeks or days. For example, the value of Bitcoin in 2021 started at just over $28,000 on January 1 but peaked at a whopping $46,500 by December 17, yielding a staggering 60% ROI in just 12 months.

Easy: Because it’s all digital, investing in cryptocurrencies is relatively easy and quick. Plenty of exchange forums like Coinbase, Gemini, or Binance make it easy to familiarize yourself with the crypto landscape.

Safe: The blockchain technology that underlies cryptocurrencies is also safe. Because of the decentralized nature of the blockchain, no hacker can access the entire chain in one go; any information stored on the blockchain is secure for good.

Disadvantages 

Volatility: The first and most obvious disadvantage is the volatility associated with cryptocurrencies. While the dramatic value increases can make it seem like an investment into crypto is easy money, the asset class’s volatility means that fortunes can be lost overnight. 

Loss: You could also lose your virtual wallet or forget your access key. Without these, there is no way to recover your coins, and you’d have lost everything you invested.

Bubbles of Growth Driving Overvaluation: The hype surrounding new coins can drive the value up, but once the hype dies down, you could see the value of your investment fall below what you paid for it and never recover. New coins are coming out every day, and the ones built around hype rarely last.

Relatively New: The last disadvantage of crypto is that it doesn’t have a proven, long-term track record. Unlike traditional assets, which have been around for centuries, cryptocurrencies have only been around for the last 10-15 years. And have only been considered serious investments over the previous 6-7 years. This means that there isn’t much data to support long-term risks, pitfalls, or weaknesses in the asset, as there is with traditional assets.

Correlation To Other Assets

Cryptocurrencies show stronger correlations to growth funds than value funds, weaker positive correlations with bonds than equities, negligible positive or negative correlations with precious metals, and negative to weak positive correlations to sector ETFs.

These correlations are the same across the five most popular cryptocurrencies, with slight variations between each coin.

The Legality of Crypto Investments

Cryptocurrencies have complete legality in the United States. The U.S. Treasury classified bitcoin as a convertible decentralized virtual currency in 2013.

The IRS classifies cryptocurrencies as property when it comes to tax purposes. This means that general property tax principles apply to crypto investments and transactions, and any profits made on crypto assets are to be reported as capital gains.

Cryptocurrency trading usually involves holding coins in a foreign or offshore account. As of January 2022, federal law does not view a foreign cryptocurrency account as a “reportable account.” 

Cryptocurrency account holders are not required to file disclosures of their foreign accounts to the Financial Crimes Enforcement Network (FinCEN). FinCEN has stated that it intends to propose amendments to the filing requirements regarding foreign bank accounts, including cryptocurrency holdings.

Ways to Invest in Crypto

Just like you need to select a broker to buy stocks from, you need to choose an exchange to trade on when it comes to crypto. Once you’ve settled on an exchange, you can start investing and trading.

Since popular coins are valued at thousands of dollars, most exchanges will let you buy fractions of a single coin. This makes it easier for new investors to get their hands on more popular, time-tested coins affordably.

All cryptocurrencies are added to a digital wallet that stores your investments when you open an account with an exchange. Your wallet holds the codes for all your cryptocurrency. Software and hardware wallets are available, with software wallets being programs that keep your crypto and hardware wallets being physical devices that store your crypto.

Hardware wallets are more secure, but they usually aren’t necessary.

The three most popular coins for beginners to invest in are Bitcoin, Cardano, and Ether.

How Hedgeful Invests in Cryptocurrencies

At Hedgeful, we use cryptocurrency investments to offset portfolio stagnation and add greater levels of diversification. Because of their low correlation to traditional assets, crypto minimizes volatility and risk overall.

We track Crypto’s appreciation and growth trends to decide on an optimal asset allocation based on your risk-tolerance and annualized return. Using crypto along with eight major asset classes, we create a balanced, institutional portfolio for retail investors. 

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