Concept: For a beginner to the intermediate crypto user who is comfortable with the jargon, has done some research and bought into some assets, and started trading. Advice on asset management using the Eidoo ecosystem as an example.
The internet changed the way traditional investment has been done and broadened access to individuals to explore how to trade and invest directly on newly surfaced online platforms. More and more investors are growing more comfortable with foregoing a third party or broker and are taking investing into their own hands. According to Investopedia, these digital investment natives are slowly starting to diversify their portfolios and expand into cryptocurrencies as an asset class.
The blockchain and crypto industry has felt this, and the industry has responded with several crypto asset management solutions. These solutions take the hassle out of crypto investment and crypto asset management. The end-user of these platforms can quickly adopt crypto investment without the technical processes involved. There are, however, some basics that crypto newcomers and even experienced traditional financial asset managers should know.
Note: every cryptocurrency is considered a crypto asset, but not every crypto asset is a cryptocurrency. As you will see below, not every asset operates as digital cash; instead, they have other uses in the crypto landscape.
These are assets that are native to a particular blockchain. Bitcoin, for example, has Bitcoin and Ethereum has Ether. Digital coins are typically used as “money” or to fuel applications, smart contracts, or transactions.
Tokens are created on blockchains with different purposes and are used with decentralized applications (DApps):
- Platform tokens power the blockchain and act as gas for transactions on the chain, like banking fees.
- Transactional tokens are used to transact and serve as units of account and are exchanged for goods and services like traditional currencies.
- Tokenized assets represent something physical, such as gold, diamonds, or real estate. The object’s value is tokenized, and the authenticity of this value is on the blockchain.
- Utility tokens are issued to fund the development of the cryptocurrency but do not grant the token holder ‘rights’ to things like equity or shares or profits of a company. Utility tokens are integrated into an existing protocol on the blockchain and used to access that protocol’s services.
- Security tokens are a digital form of traditional securities. Traditional securities represent an ownership position in a publicly traded corporation, a creditor relationship, or governmental body. Therefore, security tokens grant their owners specific rights, such as shares of the company, share of profits, real estate ownership shares, or other rights, and are regulated by national financial regulatory organizations.
Before embarking on a crypto investment strategy, it is necessary to know the typical types of assets. It is also essential to understand why these assets exist. Once you know their purpose, it will make it easier to decide what to invest in and where to invest.
The blockchain and crypto industry is relatively new in the grander scheme of things, and for that reason, many projects on the blockchain are seeking funding. These projects have their tokens and invite potential investors to participate in the project.
Participants can choose their level of interest, participation, and investment. They can simply be part of the community or act as part of the DAO (Decentralized Autonomous Organization), depending on the project’s maturity. Investing in a project requires the investor to have patience and want to direct the project’s trajectory. They can do so by staking more in the project and having a bigger say on it.
Liquidity mining and yield farming are other ways to use your crypto assets for investment. This sort of investment makes the crypto landscape more liquid. By investing or staking your assets in specific liquidity pools, you can look forward to, in some instances, triple-figure yields in time.
Collectible crypto assets called Non-Fungible Tokens (NFT’s) are prevalent at the moment. They are unique and special tokens created on the blockchain that have a value attributed to their rarity. Examples are CryptoKitties and Cryptopunks. Physical and rare assets that have their authenticity hashed on the chain, such as a precious piece of art or a rare baseball glove, can also be considered NFT’s. You can even buy a portion of land or a stake in an expensive sports car as a tokenized asset.
Some crypto asset’s values are linked directly to “real-world” assets like the US Dollar. These types of assets are called stablecoins, and as their name implies, they bring stability to what can be quite a high risk and volatile space. As with traditional investing and asset management, there are many options — depending on your nerves and appetite.
Most investors and traders know not to put all of their eggs in one basket — one needs to diversify. Considering the options we have mentioned above, it’s easier said than done. Where can one begin?
In the crypto asset management market, there are several options. A platform like Eidoo is the perfect gateway to a variety of crypto assets and is one of the best DeFi platforms for crypto asset management.
The Eidoo ecosystem lets users explore a world of crypto assets like NFTs and gives users access to yield farming or staking. It provides centralized dashboards to keep track of all your different assets and their values. Furthermore, a platform like this has access to a decentralized exchange, and you can import any crypto wallets you already have. Moreover, you can utilize the Eidoo wallet for swaps and trade. Eidoo also gives you a way to spend what you have earned with their Visa-backed Debit Card — the eidooCARD.
Eidoo is the ideal experience – an all-in-one, easy-to-use space coupled with the security afforded by one central point of entry. In the safety of an ecosystem like this, you can dabble and experiment with different strategies to reap the rewards for you in the long run. With a platform like Eidoo, you become your crypto asset manager!