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The Definitive Modern Investor Guide for Crypto Asset Management

September 7, 2019 Amadeobrands

The Definitive Modern Investor Guide for Crypto Asset Management

You’re probably wondering how to handle all that crypto asset. Well, don’t fret.

Cipher Assets came up with the most comprehensive guide for crypto asset management. And this guide will help ease through the process, whether you’re an amateur or a veteran digital trader.

But before we begin, let’s first talk about crypto assets.

What Are Crypto Assets/Digital Assets?

Crypto assets’ or ‘digital assets’ are defined as:

“assets which utilises cryptography, peer-to-peer networking, and a public ledger to regulate the creation of new units, verify transactions, and secure transactions without the intervention of any middleman.”

This is often interchanged with ‘cryptocurrency’, which refers to the form of electrical money. Crypto assets is more of an umbrella term. Cryptocurrency is just a type of crypto asset.

They are often stored and traded digital through the use of peer-to-peer (P2P) platforms. Often, these P2P platforms come in exchange desks and over-the-counter (OTC) platforms.

Along with cryptocurrency, ‘token’ is also used. Tokens “represent a particular fungible and tradable asset or a utility that is often found on a blockchain.” Tokens aren’t necessarily cryptocurrency. Tokens are the smallest piece of unit in crypto assets. Later, we will elaborate on the use of each one.

If you’re familiar with Bitcoin, Ethereum, Litecoin, Ripple, then you have an idea of what crypto assets are.

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Types of Crypto Assets

There are different types of crypto assets. People often think of any digital asset as cryptocurrency. But it is best to classify each crypto asset to determine their purpose.

Cryptocurrency

The word ‘crypto’ is defined as ‘hidden’ or ‘secret’. This refers to the nature of cryptocurrency, referring to its decentralized and secure nature. ‘Currency’ means a system of money used in a country. And with cryptocurrency, it’s the digital world.

Cryptocurrency is the most popular form of crypto asset. They are meant as a form of payment used around the world. Their value largely depends on supply and demand and are highly volatile.

Platform Tokens

Platform tokens are mostly created to fund decentralised projects. They act as a platform to these projects. The best example would be Ethereum. Ethereum provided a base for the hardware and software used for platform tokens and decentralised apps (called dApps).

With the introduction of smart contracts, new projects called be built on the Ethereum platform and provide their own self-executing actions.

Transactional Tokens

These tokens allows fast transactions across platform borders. The transactions done with these tokens are often transparent, meaning the data is known to the public. These token are also often blockchain based. The best example with be Ripple.

Utility Tokens

These tokens, like platform tokens, are also based on decentralised projects. These can be traded for services or in-store/in-app purchases for the project. The value of these tokens are predicted depending on the success of the decentralised project. If more investors came in with the project, the value would be affected.

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Are Crypto Assets Safe?

The short answer, yes! Crypto assets are safe to use by everyone. The modern investor, bank investors, hedge funds, and institutions all use cryptocurrency nowadays.

The long answer, yes! But with the right crypto asset management strategy. Crypto assets are relatively safe. But like other fiat money, they involve risks.

With cryptocurrency, they are free from central banks or the government. But cryptocurrency has a volatile market. Money value goes up and down really fast. And with this kind of market, constant accounting and vigilance is required.

Other digital assets like the platform tokens depend largely on the success of the projects they are created for. The risks and benefits of these tokens are often defined within the project’s whitepaper.

In addition, digital asset security highly depends on its storage platform. The amount of cryptocurrency available for storage depends highly on the platform. Most cybersecurity issues are protected by these storage platforms. Crypto assets are quite difficult to hack. But, cybersecurity also depends on the user and the community that uses the blockchain. The encryption keys used to access these crypto assets are protected by the user.

The Digital Wallet

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Most storage platforms are called digital wallets.

These digital wallets or cryptocurrency wallets are a method of storing cryptocurrency. Don’t get misled though. You don’t really put money inside the wallets. Instead, these wallets hold the keys to your cryptocurrency.

Digital wallets also hold both private and public keys to your digital assets. By having these keys, no one else can have access to your cryptocurrency. If you lose your key, you won’t have access to your cryptocurrency. So, keeping your keys safe is important.

Different Types of Digital Wallets

Now, depending on what you need there are different types of digital wallets. There’s what we call cold storage and hot wallets. Cold storage refers to offline applications.  And these can be used through computers or smartphones. Cold storages or cold wallets are considered the most secure method of storage cryptocurrency. Often, people place their keys in a piece of paper or flash drive.

In comparison, hot wallets are programs used online. These online programs offer storage services and the crypto trader entrusts the public or private key with the platform. Sometimes, this comes with a fee.

Some organizations use multi-signature keys. Private keys cannot be accessed by a single person, and would require keys from a lot of people within the organization. This provides added security for big companies as cold storage are prone to losing keys and personal computer attacks, while hot wallets are prone to cyberattacks.

Choosing whether to use one or the other highly depends on the need.

The Modern Investor and Crypto Assets

The Internet of Things (IoT) made online trading and investment easier. With digital assets, investment often comes in the form of trading. Crypto assets have value and when traded or stored can earn revenue.

Depending on the type of crypto asset, earnings and revenue often come in supply and demand and market changes. A buy or sell can be made through different platforms through the use of P2P chat rooms, digital wallet platforms and the like

  • Traditional markets: Like with other fiat, cryptocurrencies also have a traditional market. These are defined by market value and is the most secure way to trade crypto. But often deals the least revenue.
  • Exchange desks: Exchange desks are seen in digital wallets and online websites. A buy or sell can be placed here, and either investors can see your trades or the platform will do a match up for you. These exchange desks are very popular among crypto traders. But often have a limit due to its transparency.
  • OTC platforms: OTC platforms are mostly used by hedge funds. This type of platform deals with large amount of cryptocurrency, and is considered the most risky. OTC trading often makes dealers trade directly and imposes a larger limit of crypto.

The Art of Crypto Asset Management

Most people use multiple wallets to spread their cryptocurrencies. This creates security, just like with money in the bank. But using many wallets make it crypto assets difficult to manage. Transactions are harder to do and the risk of losing track of everything is common

Traditionally, people still use pen and paper to manage crypto assets. Difficult and inefficient, this drives off people from getting into crypto asset investment. But even though there are some problems, interest with crypto assets have not waned.

By having multiple wallets and different crypto assets, the best way to do crypto asset management would be a software platform. A crypto asset management platform would be beneficial to the modern investor.

Crypto Asset Management Software

The best asset management software should catered to handle multiple cryptocurrencies with ease. The software entails the users to better crypto asset tracking, tracing and transferring. The software would serve as the master spreadsheet to give an overview of all the assets you would have.

Management software would offer stability to digital assets trading. Depending on the features, this would involve grouping assets together, creating a backup data, ease transfer to channels, alerts during buys and sells, and extra protection for data.

This blog was reproduced from Cipher Assets with permission. EOI Digital doesn’t claim ownership over the article or any content posted here.

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