The clever way to invest in cryptocurrencies without losing it all

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Cryptocurrency investors are being warned they should be prepared to lose all of their money but there are still some steps that can be taken to cash in on sharp losses.

Bitcoin plunged by 16 per cent on Wednesday after Tesla founder Elon Musk declared he would no longer accept it as payment for his electric vehicles.

The billionaire argued cryptocurrencies were being ‘mined’ using high-powered computers requiring fossil fuel energy to continuously solve computational math puzzles.  

Musk in March bought $US1.5billion of the world’s most valuable cryptocurrency, sending its price to a record $US60,000 or $A80,000.

Despite this week’s fall, Bitcoin has still surged 424 per cent during the past year to be worth $63,830.94 on Friday, albeit below last week’s levels above $74,000.

Cryptocurrency investors are being warned they should be prepared to lose all of their money but there are still some steps that can be taken to cash in on sharp losses. Bitcoin plunged by 16 per cent on Wednesday after Tesla founder Elon Musk (pictured) declared he would no longer accept it as payment for his electric vehicles

Cryptocurrency investors are being warned they should be prepared to lose all of their money but there are still some steps that can be taken to cash in on sharp losses. Bitcoin plunged by 16 per cent on Wednesday after Tesla founder Elon Musk (pictured) declared he would no longer accept it as payment for his electric vehicles

Kunal Sawhney, the founder and chief executive of market analytics group Kalkine, said without government regulation, cryptocurrency investors needed to be prepared to lose the lot.

‘No doubt, cryptocurrencies hold tremendous potential to create millionaires in no time,’ he told Daily Mail Australia.

‘However, it is hard to neglect the luck factor and heightened risk levels driving such fortunes. 

‘So, before getting carried away with the cryptocurrency hype, it is important for investors and traders to understand the fundamental rule of trading in cryptos: one should be ready to lose all their money.’

Nonetheless, Mr Sawhney said investors could benefit from cryptocurrencies without being too exposed to losing everything by putting money into exchange traded funds or contracts for difference, tied to the digital stores of money.

Like hedge funds on the share market, investors can bet on prices going down. 

Kunal Sawhney, the founder and chief executive of market analytics group Kalkine, said without government regulation, cryptocurrency investors needed to be prepared to lose the lot. Pictured is a stock image of a Bitcoin token

Kunal Sawhney, the founder and chief executive of market analytics group Kalkine, said without government regulation, cryptocurrency investors needed to be prepared to lose the lot. Pictured is a stock image of a Bitcoin token

‘Hedging in the crypto space can be undertaken in the form of taking exposure to inverse-bitcoin ETFs wherein investors can hedge against potential bearish moves,’ Mr Sawhney said.

‘Besides, short-selling and hedging with crypto CFDs can also be looked at, depending on risk profile and return expectation of the investor.’

Dogecoin, which Australian Jackson Palmer co-founded as a ‘joke’ in 2013, has surged in value by an astronomical 17,731.6 per cent to 67.38 cents during the past year.

Mr Sawhney expected the social media-driven cryptocurrency to halve to just 32 cents within weeks.

‘While the price of Dogecoin has skyrocketed this year, the meme-turned cryptocurrency is forming a very clear bearish divergence on the charts, making it a good candidate for a short-term correction,’ he said.

Dogecoin, which Australian Jackson Palmer co-founded as a 'joke' in 2013, has surged in value by an astronomical 17,731.6 per cent to 67.38 cents during the past year. Mr Sawhney expected the social media-driven cryptocurrency to halve to just 32 cents within weeks

Dogecoin, which Australian Jackson Palmer co-founded as a ‘joke’ in 2013, has surged in value by an astronomical 17,731.6 per cent to 67.38 cents during the past year. Mr Sawhney expected the social media-driven cryptocurrency to halve to just 32 cents within weeks

‘Following a sharp rally, the charts suggest that the price of this digital currency may go downhill over the next few weeks, possibly creating a good area for bulls to enter again.’ 

Ethereum, an alternative banking system, known as decentralised finance or ‘DeFi’ has surged by 1,495.4 per cent during the past year to $4,929.22.

But Mr Sawhney said this cryptocurrency, favoured by future-oriented businesses, was on track to surpass the $10,000 mark by the middle of 2021 before potentially sliding.

‘Any sort of exposure to Ethereum needs to be carefully evaluated in terms of risks associated with volatility,’ he said.

As for Bitcoin, Mr Sawhney said that despite recent falls, it had the potential to push the $US100,000 barrier, or $129,000 in Australian dollars within little more than a year

As for Bitcoin, Mr Sawhney said that despite recent falls, it had the potential to push the $US100,000 barrier, or $129,000 in Australian dollars within little more than a year

‘One needs to consider the privacy, security and consumer protection implications before placing a trade on this crypto asset.’

As for Bitcoin, Mr Sawhney said that despite recent falls, it had the potential to push the $US100,000 barrier, or $129,000 in Australian dollars within little more than a year.

‘The recent retreat in Bitcoin seems to be a healthy correction after a power-packed rally,’ he said.

‘While the momentum is not as strong as it was a month back, if Bitcoin acceptance continues to accelerate, market also expects the currency reaching an all-time high of US$100,000 by mid-2022.’

Unlike Dogecoin and Ethereum, Bitcoin’s circulation is limited to 21million ‘mined’ cryptocurrencies. 

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