Investing In Crypto: Which Coins Are Worth Your Money?

Investing in rare coins can be a profitable venture, but it is important to remember that it is a long-term strategy. The value of a coin is influenced by a variety of factors, including its rarity and demand. Gold coins, for instance, are a popular way to diversify one's portfolio and protect wealth, offering both aesthetic and historical value in addition to monetary gains. Cryptocurrencies, on the other hand, are a relatively new asset class that has gained popularity due to their decentralized nature and potential for high returns. However, they also come with higher risks, such as scams and fraud.

Rare coins as a long-term investment strategy

Rare coins can be a good long-term investment strategy. They can add diversity to a portfolio that is focused on stocks and bonds. While the value of rare coins can fluctuate with demand, they are generally a non-volatile asset type.

Historically, rare coins have offered significant profit potential. Prices of elite coins appreciated by more than 1,000% from 1976 to 1980 and by 600% from 1982 to 1989, according to a rare-coin newsletter.

Rare-coin investing can be profitable, but it also has some downsides. Firstly, earning money from investing in rare coins takes time. Secondly, the market can be volatile, with coin prices soaring or crashing depending on the popularity of a particular coin or series of coins. Finally, investing in rare coins can be complicated due to the potential for counterfeit or doctored coins.

If you are considering investing in rare coins, it is recommended to find a mentor who can guide you through researching the value and potential future value of coins. You can also gain knowledge by attending coin shows, reading books and articles, talking to coin dealers, and joining coin clubs.

• American Gold Eagle
• American Gold Buffalo
• South African Gold Krugerrand
• Canadian Gold Maple Leaf
• Chinese Gold Panda

Gold coins for portfolio diversification

Gold has been considered a valuable asset for thousands of years due to its scarcity, durability, and widespread acceptance as a store of value. It is also regarded as a hedge against inflation, a safe-haven investment during economic uncertainty, and a currency hedge. As such, gold can be a good addition to your investment portfolio.

• Gold is considered a classic inflation hedge because its price tends to rise during inflationary periods, protecting your purchasing power.
• Gold is the world's first currency and is viewed by Western investors as an alternative asset, a commodity, and a portfolio diversifier.
• Gold has traditionally been seen as a safe investment that increases in value during times of geopolitical crisis or political instability.
• Gold coins offer direct ownership, with no counterparty risk of default or non-performance by a third party.
• Gold coins may have additional collector's value due to their rarity, design, or historical significance.
• Gold coins are easily accessible to the average small investor and can be purchased from online dealers.
• Gold coins can be stored securely in safe-deposit boxes or home safes, providing a tangible asset that is not reliant on third parties.

However, there are also some downsides to investing in gold coins:

• Storage and security concerns: Physical gold incurs additional costs and risks, such as theft or damage.
• Liquidity: Selling physical gold may take time and effort to find a buyer and negotiate a price.
• Premiums and taxes: The purchase of physical gold often involves paying premiums and taxes, impacting overall profitability.
• No interest or cash flow: Holding outright physical gold does not generate interest or cash flow, and profits rely solely on metal price increases.

When adding gold to your portfolio, experts suggest allocating between 2% and 10% of your portfolio to gold coins, such as Maple Leafs and American Eagles. This diversification can help protect and enhance returns while reducing volatility in your investment portfolio.

Cryptocurrencies with high market capitalisation

When considering which coin is good for investment, it is important to look at cryptocurrencies with high market capitalisation. Market capitalisation, or market cap, is a financial measure calculated by multiplying the price of a cryptocurrency by the number of coins in the market. This gives investors an idea of the overall market size and indicates how much money is flowing in and out of each cryptocurrency.

Bitcoin (BTC) is the original cryptocurrency and, as of 27 August 2024, had a market cap of $1.2 trillion. Its price has skyrocketed as it has become a household name, with a single bitcoin costing around $62,407. Ethereum (ETH) is another cryptocurrency with a high market cap, sitting at $315.4 billion. It is both a cryptocurrency and a blockchain platform, favoured by program developers for its potential applications.

Other cryptocurrencies with high market caps include Tether (USDT), a stablecoin with a market cap of $118.0 billion; Binance Coin (BNB), with a market cap of $80.5 billion; and Solana (SOL), with a market cap of $72.2 billion.

It is worth noting that the cryptocurrency market is highly volatile, and investors should carefully consider their goals, timeline, and risk profile before investing.

The pros and cons of investing in crypto

There are several advantages and disadvantages to investing in cryptocurrencies. This section will outline some of the most significant pros and cons to help you make an informed decision about investing in crypto.

Pros:

• Secure and decentralised technology: Crypto is supported by blockchain technology, which is secure and independent of traditional banking systems.
• 24/7 trading: Crypto markets operate around the clock, allowing investors to make transactions at any time.
• Potential for high returns: Cryptocurrencies are highly volatile, which means there is a chance of greater returns.
• No intermediaries: Crypto offers a more transparent and fair financial system by eliminating the need for third-party intermediaries in transactions.
• Beating inflation: Cryptocurrencies are not tied to a single economy or currency, and the number of coins is capped, making them a hedge against inflation.
• Accessibility: Crypto improves financial inclusion by providing access to financial services for unbanked and underbanked populations worldwide.

Cons:

• Extreme price volatility: Cryptocurrencies are subject to sudden and extreme price fluctuations, making them a risky investment.
• Learning curve: Understanding cryptocurrencies and blockchain technology can be challenging and time-consuming, especially for those unfamiliar with digital assets.
• Uncertain long-term viability: Cryptocurrencies have only been around for just over a decade, so it is uncertain if they will remain viable in the long term.
• Scalability issues: Crypto providers admit that blockchains have capacity limitations, which slow down transaction processing and cause frustration for users.
• Security risks: Crypto exchanges are vulnerable to hacking, and investors may also lose access to their private keys, leading to potential financial losses.
• Evolving regulations: The regulatory landscape around crypto is still evolving, creating uncertainty for investors and businesses.

Overall, while crypto offers several potential benefits, it is important to carefully consider the drawbacks and risks associated with this relatively new and volatile asset class.

Gold bullion coins as a hedge against inflation

Gold bullion coins are an excellent investment option, particularly as a hedge against inflation. Gold has been a store of value for thousands of years and is a tangible asset with real-world uses, such as in jewellery and electronics. Its value is not tied to the performance of stocks and shares, and it can be a good way to diversify your portfolio.

Gold is often seen as a safe haven during economic uncertainty and currency devaluation, and its value tends to rise as the purchasing power of the dollar declines. This is because, unlike fiat currencies, gold has a limited supply.

Gold's value as a hedge against inflation can be seen when looking at the US's experience with high inflation in the 1970s. From 1973 to 1979, average annual inflation was around 8.8%, and during this time, gold generated an impressive 35% annual return, solidifying its reputation as a top inflation hedge.

However, gold's performance as an inflation hedge has been inconsistent. From 1980 to 1984, for example, annual inflation averaged 6.5%, but gold prices fell by 10% each year, underperforming real estate, commodities, and the S&P 500.

Gold's mixed record as an inflation hedge may be due to several factors, including supply, investor sentiment, and other commodity market dynamics. Additionally, gold is subject to capital gains tax, and bullion coins held for a year or longer are taxed at a rate of approximately 28%.

Despite its inconsistent performance, gold can still be a valuable addition to an investment portfolio due to its low correlation with stocks and bonds, offering diversification benefits. Gold also held its value well during the COVID-19 market sell-off in early 2020, with its price dropping by less than 0.1% compared to a 23% decline in the S&P 500.

In summary, gold bullion coins can be a good investment option and a hedge against inflation, but investors should be aware of the potential downsides, including volatility, opportunity cost, and tax implications.

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