Saturday 6th January 2018
55 Financial & Legal Resolutions • New Year New You
Crypto needn’t be cryptic
With interest in bitcoin and other top cryptos reaching unpredictably high levels in 2017, many are looking to get involved — and global trading and investment platform eToro can help
ness. Led by bitcoin, the first cryptocurrency which was proposed only a decade ago, interest has exploded on a scale that couldn’t have been predicted by anyone. Back in 2013, one bitcoin was worth $12 (£9). At
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the time of writing they’re worth $17,500 (£13,441) each — and given the recent surge in price it’s no exaggeration that it might be nearer $30,000 (£22,368) in just a few months’ time. Indeed, from October to December 2017
bitcoin’s value doubled, and for any currency’s worth to increase by 100% in just two months is, well, crackers. The founding crypto has long been described as digital gold, and at the start of November it was reported, by Bloomberg, that ‘buy bitcoin’ had surpassed ‘buy gold’ as an online search phrase. As such, now’s a bril- liant time to learn about how to trade and invest in cryptos. There are now believed to be more than 1,000
cryptocurrencies, and they all spawn from bitcoin. While not nearly as successful as the original crypto, many are thriving — including ethereum, XRP, dash, and litecoin, to name but four. But why have these digital currencies become so popular, and can we expect this trend to continue? Currency has taken two forms throughout
history: firstly, physical assets, such as gold, or other precious metals, beads, and so on; or government-backed fiat currencies, like notes and coins, which can be influenced through fiscal intervention and monetary policies. Bitcoin and other cryptos have created a third
option, which is why many are excited: they’re decentralised, inflation-proof, digital currencies powered by economics, algorithms, mathemat- ical proofs and cryptography (hence the name). The underlying technology and infrastructure is blockchain, a decentralised digital ledger that records transactions on a peer-to-peer network which is secured by a range of unrelated indi- viduals, called ‘miners’, who must crack math- ematical puzzles. This allows digital currency transactions to be recorded without central record-keeping and also solves the problem of ‘double spending’. “Until recently, the story of cryptocurrencies
has focused on whether they can become real- world currencies, capable of global transactions
ithout question, 2017 was the year that cryptocurrencies forcibly flowed into the mainstream of public conscious-
on a large scale,” says Iqbal Gandham, United Kingdom managing director at eToro, a leading global social trading and investment plat- form which offers more than 1,200 instruments across stocks, currencies, commodities, ETFs, indices, and cryptos. “With bitcoin’s market capitalisation continuing to grow, this is looking increasingly likely.” A growing number of businesses across the
world are accepting bitcoin as payment, including Microsoft, Subway, Expedia, Virgin Galactic and WordPress. Little wonder the lure of cryptocur- rencies has become too hard to ignore for main- stream financial institutions; in October, top investment bank Goldman Sachs revealed it’s considering offering bitcoin instruments to its clients. And other cryptos are on the rise: at the time of writing 15 of them have a market size of more than $1bn (£800m). That figure’s expected to rise in 2018. Most people don’t want to buy Xbox games or holidays with cryptos, though — and huge numbers of investors are cashing in on the markets. ‘Crypto needn’t be cryptic’ is the mantra
of eToro, which was founded in 2007 with the aim of opening the global markets for everyone to trade and invest in a straightforward and transparent way. Mr Gandham continues: “We differ from traditional asset managers by giving investors more transparency over their invest- ments which they can view online at any time. “We offer our six million registered users an
online community to discuss trading strate- gies, which is now becoming heavily focused on cryptocurrency topics.” At eToro there are three ways to get involved
in cryptos. Firstly, one can buy and trade cryptos manually. Secondly, traders can explore eToro’s CopyTrading facility, allowing clients to match the trades made by top crypto investors. Finally, it’s possible to invest in the platform’s unique Crypto CopyFund which currently holds a mix of bitcoin and ethereum, the second-largest crypto by market capitalisation, dash and more. As of the start of this year, eToro offers seven
cryptocurrency markets; namely, bitcoin, bitcoin cash, dash, ethereum, ethereum classic, litecoin and XRP. Given the youth of the markets, there’s still volatility, which has led to price swings in reaction to events such as organisations supporting a cryptocurrency, announcements of ‘hard forks’ — a technical term when a crypto splits into two — or other related news.
Timeline of Key Cryptocurrency Launches £$ E
EVOLUTION OF CURRENCY
E C
9000BC
In the begining Man would barter goods they had in surplus for goods they were in need of
Cryptos have created a third option: they’re decentralised, inflation-proof, digital currencies powered by economics, algorithms and cryptography (hence the name)
600BC
The introduction of coins allowed for trade to flourish
1661
Paper money was mass produced and did not rely on raw materials like gold and silver
CopyTrading facility comes into play. Clients are able to automatically copy the trading strate- gies of eToro’s top-performing cryptocurrency experts, such as Wes Nolte, Alex Plesk and Jay Smith. The latter, for instance, has returned more than 300% in the past 12 months. Lastly, for those who believe in the tech-
1946 The first charge card
was introduced in 1946 and has evolved into payless cards
2009
Launched in 2009 Bitcoin became the first fully implemented decentralised currency
nology’s potential, eToro’s Crypto CopyFund — made available in mid 2017 — allows clients to invest in the world’s biggest cryptocurrencies in one innovative portfolio, which has seen more than 70% returns in the past six months. The future looks very bright for crypto-
currencies, as global platforms like eToro open up the market for anyone to invest in a straightforward and transparent way. As Mr Gandham adds: “We’ll continue to find ways to make trading and investing in cryptocurren- cies, as well as other instruments, accessible for everyone.” Words by Oliver Pickup
“Investors can capitalise on these swings,”
suggests Mr Gandham, noting that eToro allows clients either to buy the underlying crypto asset or short-sell (via a Contract for Difference) to take advantage of price falls. “We recommend a diversified approach to shelter from cryp- tocurrency volatility, as with any investment there’s a risk you’ll not get back the capital you put in. However, the volatility that we’ve seen in 2017 presents an exciting opportunity for traders and has shown positive growth for long-term investors.” Those confident and knowledgeable can buy
and short the top seven cryptocurrencies manu- ally through eToro, though Mr Gandham urges traders to understand the underlying business case for each instrument before investing. For some, that level of commitment and educa- tion might be daunting. That’s where eToro’s
Five facts about bitcoin
1. The first decentralised cryptocurrency, Bitcoin, was created in 2009 after Satoshi Nakamoto, a pseudonym for bitcoin’s creator, mined the first block on the chain.
2. In 2010, a programmer bought two pizzas for 10,000 BTC in one of the first real- world bitcoin transactions. Today, 10,000 BTC is equal to roughly $100m (£80m).
3. Bitcoin wasn’t traded on any exchanges until 2010, when its highest price was $0.39 (£0.29). The value of one bitcoin was $17,500 (£13,441) at the time of writing.
4. A growing number of companies accept bitcoin as payment for products or services, including Microsoft, Subway, Expedia and Virgin Galactic.
5. There are now more than 1,000 cryp- tocurrencies in existence, with Bitcoin having the highest market capitalisa- tion of $300bn. At the time of writing, 15 cryptos have a market cap of over $1bn, and a further 59 of over $100m (£80m).
Bitcoin Launched 2009
Litecoin Launched 2011
XRP Launched 2012
Dash Launched 2014
Ethereum Classic Launched 2015
Ethereum /
Bitcoin Cash Launched 2017
Cryptocurrencies can widely fluctuate in price and aren’t appropriate for all investors. Trading cryptocurrencies isn’t supervised by any EU regulatory framework. All trading involves risk. Only risk capital you’re prepared to lose. Past performance doesn’t guarantee future results. Trading history presented is less than five years and may not suffice as a basis for investment decisions.
For further information, please visit
etoro.com
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