Welcome to our #128 weekly newsletter.
“For women taking control of their financial future”
-Jana Hlistova
From The Purse
In this week’s newsletter, we focus on why women should invest in crypto, starting with bitcoin and how to derisk their investment.
I published the original opinion piece back in October of last year just before the crypto market peaked in November. Since then, the change in the macro environment has meant that the crypto market has plummeted.
Sure, cryptocurrencies are a new asset class. They are volatile. And yes, we are still early. But there has never been a more urgent time to invest. And invest in crypto.
Especially if you consider what has happened to the global economy since the pandemic, the rise in the cost of living and what this means for your (fiat) money and your future wealth.
You can review the news in brief so you stay on top of global financial, economic and investing trends.
I hope you enjoy this week’s newsletter.
Until next week,
Jana
Women: why invest in crypto and how to derisk your investment
Opinion piece: there has never been a more urgent time to invest
Note: we have updated this article originally published in The Purse newsletter on October 10, 2021.
Women invest in crypto.
And even though this trend is on the up and accelerating, based on the limited data we have, it is estimated that only 33%+ of women own crypto. However, women now outpace men as first-time purchasers of crypto.
Sure, cryptocurrencies are a new asset class. They are volatile. And yes, we are still early. But there has never been a more urgent time to invest. And invest in crypto.
Especially if you consider what has happened to the global economy since the pandemic, the legacy financial system and what this means for your (fiat) money and your future wealth.
Let’s put this in context: the global economy
The pandemic has been a disaster for the global economy.
The global markets crashed which is when the central banks and the government stepped in. In order to limit the damage to the economies around the world they:
reduced interest rates (to zero or close to zero)
introduced stimulus
and started printing money.
Printing money essentially pumps liquidity into the markets (this avoids a financial crisis which buffers the economy).
Put another way, central banks buy government and corporate bonds from other financial companies and pension funds.
It’s no surprise that the level of debt has gone up dramatically since the pandemic although government have recently introduced quantitative tightening (QT). In the UK, debt-to-GDP ratio is now 99% (down from 106% in March 2021).
What governments around the world had not anticipated was for inflation to surge to the level it has and at such as rapid rate.
In the UK, inflation is at a 40 year high at 9.4% (CPI) and it is forecast to be 15%+ in early 2023. In the US, inflation has slowed marginally from 9.1% (CPI) to 8.5% in July.
What is unclear is how long inflation will remain at these elevated levels versus the target 2%. And just because inflation slows, does not mean that prices will fall.
Inflation is on the rise: what does this mean for your money?
Think about the rise in energy prices, the price of food, rising interest rates: the cost of living is going up.
The value of the money you earn is falling every month inflation rises. Simply put, you need to earn more money every month and every year just to keep up.
Are wages rising?
Marginally but the point is: wage growth is not outpacing inflation.
Plus you now have less money to buy assets such as equity in the FTSE 100 index or property. This has an impact on how much you can save and invest.
However, the rise in interest rates and cutting back on money printing, has meant that stock valuations and other assets have dropped in value making them cheaper to buy.
Since the peak of last year’s bull run, the most popular crypto tokens such as bitcoin and ether plummeted by roughly 70%.
Although we have seen a reverse of the downward trend in recent weeks, crypto is still relatively cheap, compared to its highs in November of last year.
Why invest in the crypto market: focus on bitcoin
The only way to protect your hard-earned money and future wealth, is if you invest in assets.
Assets is essentially deferred expenditure which goes up in value over a given time frame. The aim is to generate returns which outpace inflation and the expanding money supply, every year.
Bitcoin, the the world’s largest cryptocurrency…
… is regarded as a store of value. Its market capitalisation is at $490bn and is currently trading at $24,500+, down from its high of $69,000 in November.
Moreover, bitcoin’s average annualised return is 200%+ …
…which is more than 10 times higher than the second-ranked asset class.
Bitcoin is a decentralised and permissionless (blockchain) technology and global monetary network which can not be controlled by any one party, government or central bank.
Unlike fiat money, bitcoin has a limited supply of 21m coins. It is impossible for more bitcoin to be ‘printed’ once all the supply is available.
Therefore unlike fiat money, bitcoin is deflationary, not inflationary. As an investor, the money you allocate to bitcoin, over a longer term horizon, should go up in value.
The price predictions for bitcoin vary from $500,000 to $1m++ (some investors are even more bullish on the price).
Had the macroeconomic environment not changed so dramatically, it was anticipated that bitcoin would reach $100,000+ in the last bull run.
Bitcoin is the largest crypto market cap asset…
…and on-chain metrics indicate that bitcoin is undervalued.
Institutions continue to buy. In fact, the BlackRock, the largest asset manager in the world, has recently announced a partnership with Coinbase. This will allow BlackRock to offer its institutional investors access to crypto, and specifically bitcoin.
And let’s not forget that El Salvador adopted bitcoin as its legal tender, and Twitter enabled payments on its network (via bitcoin).
Despite its volatility, bitcoin is increasingly regarded as ‘sound money’ and a store of value by retail investors and institutions alike.
Bitcoin is often the first crypto asset investors buy…
..as it is regarded as the foundation asset. It is where investors start before they branch out into other crypto assets including ether (ETH), DeFi tokens (decentralised finance), NFTs and smart contract platforms like Solana and Polkadot, for example.
Being aware of the risks is crucial..
..as is how much money you will allocate over what period of time and when, if ever you decide to sell.
Short-term volatility in the market matters less if you are clear about your time horizon. And investing for the long-term (5 years+) is likely to generate higher returns, as the data already indicates.
The key skill for investing in the crypto market might be to HODL (ie do not sell) when the crypto market nose drives by, 60%-85%. This is not uncommon, especially if in a crypto bear market.
We have seen a 70% drop in the value of bitcoin and ether in the last 9+ months.
One way to derisk your investment…
… is if you apply the ‘dollar-cost averaging’ approach which simply means that you invest a set amount every month, regardless of the price.
When the price of the asset is low, you can afford to buy more than when the price is high. Over time, this will give you an average price you paid for the asset.
The other way to derisk your investment is to only allocate a small amount of your overall net worth, for example, this might be 1%-5% of your overall net worth.
It’s always a good idea to seek financial advice and ensure you don’t put all your ‘eggs into one basket’. But if you seek advice from financial experts, make sure they understand the crypto market too.
Diversification is important, however this is also a very personal decision. There are many investors who choose to focus on only one or two cryptocurrencies.
Start small
Do not assume that you must be able to afford one bitcoin in order to start investing. You can decide to invest as little as £20 or £100 per month.
If money is tight or you feel nervous about investing in crypto, start by investing $1 or £1 per month via a crypto exchange.
In fact, this is a great way to start. Once you invest, whatever the amount, you will pay more attention and learn as you go.
What next?
Read the Bitcoin White Paper
Read The Bitcoin Standard
Check out crypto exchanges including Coinbase, Kraken, FTX.
Disclaimer: I invest in BTC, ETH, and other altcoins. Please do your own research. This article is for informational purposes only, we do not provide investment advice.
News in Brief
Financial news
US stocks record best stretch of year, as inflation fear recedes. The S&P 500 rose 1.7% on Friday, taking its rise for the week to 3.3 percent and marking its fourth consecutive positive week, a feat it had not achieved since October.
Nasdaq Composite exits bear market territory following US inflation data. Climbed 2.9% to 12854.80. Nasdaq Composite has now risen 20% from lows.
US July Core Consumer prices rose 0.3% month-on-month versus an estimated 0.5% and headline year-on-year CPI rose 8.5% against 8.7% expectations.
The Eurozone money markets now fully price in 50bps ECB rate hike in September.
The FTSE 100 extended gains on Wednesday after key CPI US inflation data came in lower than expected and eased concerns over soaring prices. (The FTSE 100 rose 0.3%).
UK economy contracted in second quarter amid cost of living crisis. (UK GDP fell 0.1% in second quarter). The Bank of England has already predicted the UK will enter a long recession from the final three months of this year, with the economy only growing again in the first quarter of 2024.
Crypto: bitcoin, ethereum, DeFi & NFTs
Bitcoin’s (BTC) price climbed 4% in the hours immediately after Wednesday morning’s release of the Consumer Price Index (CPI) before slowing later in the day. Currently bitcoin is trading at circa $24.5k+
Ethereum leads the charge against Bitcoin, rising 61% since June — flippening price target is at $3,750.
Ethereum’s big proof-of-stake blockchain switch could happen on September 15th. Ether is up and currently trading circa $1,900+
Ethereum’s transaction fees are now at their lowest level since decentralised finance began to attract a significant user base during the ‘DeFi Summer’ of mid-2020.
World’s largest asset manager BlackRock launched spot bitcoin private trust. After announcing it would enable bitcoin trading services, $10tn BlackRock now offers spot bitcoin exposure to institutions in a private trust.
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We’d love to hear from you. Get in touch with Jana via the The Purse website or tweet @jointhepurse and @janicka.
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The Purse provides content for informational purposes only, we do not recommend products or services or provide investment advice. Please do your own research or speak to a financial advisor.
Women: why invest in crypto and how to derisk your investment