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How to Invest in Cryptocurrency

Experts from VanEck's ETF Product share why they believe cryptocurrency will transform the way we do business and how investors can benefit.

While the global cryptocurrency market continues to surge, it's clear that volatility is a primary feature of the trend and industry experts advise investors to proceed with discernment.

Bitcoin is seeing its biggest bounce back since February following a mistyped tweet by Tesla's  (TSLA) - Get Report Elon Musk about Dogecoin, leading many to believe there's a strong correlation between Musk's tweets and the coin's price movements. Dogecoin, which famously began as a joke, soared to all-time highs this past week, briefly rising above 40 cents after trading below a penny at the beginning of the year. This ability to be moved significantly by just a tweet further proves the investment area's volatility.

One New York-based family office has developed trading algorithms for Dogecoin and is actively playing the market. 

"Volatility is a feature of a cryptocurrency, it's not a bug," said Ed Lopez, managing director, head of ETF Product at VanEck  (OUNZ) - Get Report during a recent roundtable discussion on The Digital Transformation sponsored by VanEck.

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"But, we believe that cryptocurrency, bitcoin, and others are bigger than Elon Musk. There is a whole ecosystem being built around these cryptocurrency technologies, which promise to transform how we do business," Lopez added. David Trainer, New Constructs CEO, concurred that crypto is bigger than any one player.

With the inherent risk in the bitcoin asset class, investors should be betting on asymmetric return profiles in the digital currency space.

"I think it's important to distinguish between the technology and the individual currencies, and I also think it's important to be mindful of valuation. With the advent of any new technology, there's an explosion on the front end that ends up leaving a lot of people with losses on their hands," Trainer said. 

Ethereum has been on fire as prices hit another record high Monday, breaking through the $3,000 barrier and more than quadrupling its year-to-date gains to around 330%. Ether token prices were marked 8.7% higher on the CoinDesk exchange and changing hands at $3,172.53 each.

While there’s been overall volatility in the cryptocurrency markets, ethereum has been as steady as they come. In fact, it’s been much steadier than the largest cryptocurrency, bitcoin. While bitcoin has been trading better lately, it struggled Monday, up about 2% but well off the highs.

Coinbase  (COIN) , which became one of the most popular cryptocurrency exchanges in the world and is valued at approximately $47 billion, acts as a middleman in the crypto market, allowing investors to buy and sell a wide range of crypto coins from bitcoin to Ethereum. But experts gave several reasons for bitcoin's decline that coincided with the direct listing of Coinbase and weak trading the days after.

"The volatility is expected in cryptos -- including bitcoin, the most highly-valued one by far. But bitcoin's ride up over the past year or so has been dramatic," wrote TheStreet's Adam Smith.

Zev Fima, a research analyst with Action Alerts PLUS, added that "volatility is a feature of cryptocurrency at this point and you certainly don't want too much of your cash piled into something like that. It's good risk management to make sure you keep in check the percentage of cash on the balance sheet bitcoin is." 

Regardless of its volatile nature, former president of the New York Stock Exchange, Thomas Farley said that cryptocurrency is the best-kept secret in the world and maybe even in the history of the financial markets.

Watch the full webinar sponsored by VanEck to hear more insight about the digital transformation: