Mark Carnegie’s four rules of crypto investing: Should you join the rush?

Four rules of crypto investing.

Looking to invest in crypto? There are a few things to consider first. With the sector taking off, it’s enticing to just jump in, but there’s more to crypto than meets the eye. As such, a bit of research is warranted prior to investing your hard-earned cash into digital currency.

To start with, you might want to pick out an exchange, and target a few different cryptos to start your portfolio. 

Obviously which of these you choose is up to you, and there’s heaps of material out there on the internet for you to read through to get yourself to the starting blocks.

Now that you’re there and ready to invest, how can you effectively invest? A recent column in the Australian Financial Review by well-known hedge fund manager Mark Carnegie holds some answers.

In the article, Carnegie provides a relatively unbiased view of crypto (getting rarer these days I know), arguing that while it’s a worthwhile investment, crypto has yet to reach its full potential as an asset class.

He goes on to argue that crypto has three ways to deliver on its massive potential, and must deliver on at least one.

The first is that crypto should be a hedge against monetary meltdown through inflation, like gold. While this is much-touted by crypto enthusiasts, it’s yet to bear fruit in the real world. Inflation is a major issue in many developed countries, yet crypto assets aren’t providing the hedge promised just yet.

Second is by giving the much-maligned NFT a real life use case, presenting a crypto asset with versatility beyond simply a digital store of value. While many NFT holders may say this is already the case, using one as your Twitter picture doesn’t count. That being said, there is progress being made here, especially in the videogame space, where Play2Earn is fast becoming a buzzword in the industry, with heavyweights like Ubisoft having a crack.

Lastly, crypto’s potential to decentralise the workforce through tech, and expand on the ‘working from home revolution’ must be realised. Ideas such as Decentralised Autonomous Organisations are currently in their infancy, and will need to be realised before a broader use case for the technology is established.

With all that being said, you can still make money using crypto. That’s to say, while it’s not developed a true use case yet as an asset, there’s plenty of people willing to hop on the Bitcoin bandwagon (including myself).

So how do you do it? Well, Carnegie has some tips:

  1. Your brain will get you 10 times as much profit as your money.

    What this means is you should invest smart, not lots. You’re going to make more profit if you invest in the right crypto rather than simply dumping your savings into Bitcoin. Other methods, such as trading using bots could also net you better profits, with less risk.
  1. Open a crypto account today.

    This one’s pretty self explanatory.
  1. Carve your money into pieces and invest a small piece each quarter.

    Invest a little, regularly. It will start to add up over time, which will multiply any gains you make on the market.
  2. Don’t invest more than you can afford to lose because this asset class could still blow up completely.

    Again, don’t invest too much. Since there’s not a true use case for crypto assets, they could simply disappear in the next 5 years. There’s also the risk of your exchange going broke, which would cause your hard-earned investments to simply disappear.

In short, it’s best to invest a little now, so if crypto continues its path towards mainstream use and acceptance, you’re not left behind. If it doesn’t, and simply disappears, you’re not going to need a payday loan.

If you’re interested and want to read more, you can view Carnegie’s whole article here.