I have been reading GMGH’s recent posts about Cryptocurrency. The latest one being Don’t Crybaby To Me About Bitcoins & Cryptos. His posts piqued my interest in Cryptocurrency, which is a financial topic that I have no knowledge of. Not even a cursory understanding of it. I know it is a digital currency that used encryption/cryptography to generate money and verify transactions. Examples of Cryptocurrency are Bitcoin, Ethereum and Litecoin. There’s a Cryptocurrency Wallet that is a secure digital wallet used to store, send and receive digital currency. This technological development is expected to revolutionise and change the world.
GMGH talks about Cryptocurrency exchange in Singapore and mentions Coinbase. I went to have a look and it seems like a simple and well-designed platform to buy and sell digital currency. I check the 1 month price history of Bitcoin, Ethereum and Litecoin on the Coinbase website and this is what I found.
Is it considered an Alternative Asset?
The rate of returns in the past month are much higher than any other asset class. Which brings me to my next question. Would you consider Cryptocurrency an Alternative Asset? It refers to assets that have not been traditionally considered part of an investment portfolio. Examples of traditional asset classes being stocks and bonds. But I am confused. I thought Cryptocurrency is a transfer or payment mechanism. How can it be a store of wealth as an alternative asset class? Then again, cash can be used to make payments and transfer wealth, hence it is considered an asset class. Plus Cryptocurrency does have asset-like characteristics. It has a limited supply and is traded on exchanges in multiple currencies around the world.
Do I have sufficient cash funds to take a position in Cryptocurrency?
Knowing nothing about Cryptocurrency and investing in it is the fastest way to get burnt. Before I decide to pursue this any further, I want to know whether I have enough cash to take a position. Our investment portfolio has been overweight on cash for a while, which suggests I have room to allocate a portion of it to Cryptocurrency. I have always wanted to start building up an alternative asset component of our asset holdings. Perhaps now is the time to start exploring this further. But I really should read up on Cryptocurrency first and I will need to convince my wife about this. Wish me luck!