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Maybe I should focus on the scholarship? Maybe I should invest in the S&P500? And what about cryptos? Between traditional finance and cryptos, what pays the most?
If you’ve ever asked yourself one of these questions, then this article is for you guys!
Element of comparison
We will take the date of 1st May, 2018 as an example for comparison. Why this date? Because that is exactly when we launched our SmartBTC!
If you had invested $1000 in Bitcoin in 2018, you would have achieved a performance of 151.53% and your capital would now be $2515.3. Not bad!
If you had bought gold at the same time, you would have realized a performance of 43% for the capital of now $1430. This is positive but lower than the investment in BTC.
If you had invested $1000 in the 4C-Trading SmartBTC during the same period, you would have realized performance of 295.6% for a capital of $3956. Quite impressive!
We have seen that Bitcoin has been a better performer than Gold last year, let’s go back together to the elements that have influenced the price of BTC, bearing in mind that 2020 has been a year full of rebounds.
The pandemic and the market
Last March, after appearing in China a few months earlier, SARS-COV2 appeared in Europe and North America and shook the markets. As you know, when times are uncertain, investors flee risk like the plague.
During the second week of March 2020, BTC lost up to 50% of its value at the lowest point of the fall, at $3782. On that day many participants in the crypto market sold at a loss, believing that the BTC had come to an end. A big mistake that they soon realized not long after.
In the conventional market, Gold fared better than the BTC with a loss of around 13% over the same period. The SP500 is not to be outdone with a 26% drop over the same period and a total loss of 35% since the end of February 2020.
Be greedy when others are afraid!
A traumatic experience for some, this fall was also an excellent opportunity for the savvy investor. Indeed, the fall stopped in areas of high liquidity and was redeemed almost immediately.
At the time of writing, Gold, SP500, and Bitcoin have increased by 28.66%, 70%, and 519% respectively since the low point reached in March.
The cryptos market is outperforming.
The difference is striking and obvious: Over the same period, BTC has increased nearly 17 times more than Gold and more than 7 times, SP500. We’ve known since its inception that the cryptos market is outperforming the conventional market, but what exactly contributed to BTC performing so well this year and even exceeded its ATH?
Well, the explanation could lie in the influx of institutional capital, generally much better informed than retail investors, who seized the opportunity to buy BTC at low prices during the short crisis. Another possibility, which will need to be explored further, is the weakness of the dollar in the collective unconscious, which leads investors to want to protect themselves against inflation.
And what better way to protect against inflation than a deflationary cryptocurrency?
How to invest $1000 in the cryptos market?
We use $1000 as base capital because we created a series of 4C-Trading videos on Youtube regarding the subject – 5 altcoins to invest $1000 with each month. In a more general way, the content helps you to decide – if you should turn to the classical market or the cryptos market?
Answering this question will depend a lot on your investment style. Indeed, it will depend on your appetite for risk on one hand and your capital on the other hand; factoring your expectations in both cases.
- If you want a relatively safe investment with an average return of 8% per year (SP500) and you have a large amount of capital, then the traditional market and the purchase of trackers that replicate the performance of the index will be perfect for you.
- If you have an average capital, an average risk appetite and with return expectations in the area of 20% and more, you can decide to allocate part of your capital to the crypto market without being too exposed (risking too much).
- Finally, if you have a lower capital, under $10,000, and your risk appetite is rather high, the crypto market is for you.
Is the cryptos market for you?
Simply put, without taking risks in an uncontrolled way, or should we say: with equal risk-taking, the cryptos market will bring more return than the traditional assets. Making 100%+ a year is not a legend there!
We would love to hear from you. Leave us a comment and share with us what you plan to invest in 2021!
Taking Calculated Risk
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