Picture this – It’s 2017, cryptocurrency is booming and everyone’s investing in it, but wait! They’re all trying to become traders? Why? Because they have no choice! The cryptocurrency scene is optimized for traders today, services are made specifically for them. I believe this is a big blocker and why so many people haven’t gotten in the game.
Now you might be thinking “That’s not true! We have Coinbase, Coinjar and Coinspot, they’re easy!”. I agree, they are all great platforms that have made investing in Bitcoin and various other cryptocurrencies much easier. Call me picky but I need more than “It’s good enough”. There are a few missing pieces to the puzzle, that’s been my inspiration for starting MyVested. Read on and we’ll explore it in more detail.
Cryptocurrency is hard. It’s some of the most complex tech that’s ever been developed, I couldn’t tell you what half the currencies do. Even if I did understand them there’s no guarantee I’ve not just learned someones bias for their favourite coin. The issue is that it’s hard to know what currencies to choose so someone will just choose the coin that’s “cool” at the time, this is a bad idea.
If a coin is hyped and everyone’s buying it, the price is inflated. The experienced traders who got in before the hype then line their pockets at the expense of the newbies by selling their coins. This is exactly what happened when Bitcoin went to 20k and subsequently crashed. Sure it should’ve gone up but I believe it should’ve stopped at 10k. The sheer number of new people entering the market rocketed the price up to 20k.
I’ve seen many people fall victim to this and quickly lose a lot of money, to address this we choose currencies for our users, all they need to choose is their risk tolerance. To choose coins we use a proprietary algorithm to make the equivalent of an index for each portfolio type. This leads into the next issue with most crypto investments: diversity.
Ease Of Use
Buying cryptocurrencies has become a whole lot easier in recent years and that’s wonderful. Despite this we’re yet to have much that encourages responsible investing rather than just depositing when you feel like it. For example, recurring deposits is a great way to invest responsibly instead of depositing everything at once. See dollar cost averaging if you want to know why you should invest over time.
We at MyVested looked at how similar investment apps for stocks do it (e.g. Raiz, formerly Acorns) and wanted to provide the full experience too. We provide users with the option to do lump sum deposits, recurring deposits (daily, weekly, fortnightly, monthly) and the ever-popular round-ups.
A rule of thumb for any investment is to have a diverse portfolio. In an ideal world we would diversify portfolios by types of assets (and we are working on something, look forward to it!) but for the time being, we want to give our users something safer so we create an index like I mentioned in the knowledge section. These portfolios contain more assets the higher the portfolio risk, the concept is that the higher the market cap, the safer the coin. Our portfolios are Conservative, Balanced and Aggressive containing the top 2, the next 3, and next 4 coins after that by market cap. It’s important to keep in mind that some normalization and nerdy stuff is done to prevent issues like switching too much or buying pumped coins, hence our algorithm to select the indexes.
For those people that know what they want or just want more, we’re introducing custom portfolios very soon where you can choose what you want and how much of your portfolio you want each to make up.
The final step for a good portfolio is risk management, this goes extra for volatile markets like cryptocurrencies. As I’ve already mentioned we automatically manage the contents of our portfolios for our users to ensure they have relevant assets, this is all part of risk management too. In the scenario where a coin loses its popularity, we don’t want someone to be exposed to the risk that comes with a lower market cap so we will swap it out for the new one, once a month. In the situation where an asset has a major catastrophe, we will also liquidate holdings if we decide it’s the right decision but that’s not something we take lightly so it that should never happen but it’s nice for peace of mind for investors.
The final and probably our most convenient feature is automatic redistribution. We will keep a portfolio balanced at all times, let’s run through a scenario to help understand this.
Say your portfolio is 50% Bitcoin and 50% Ethereum but Ethereums price doubles, uh oh! Your Ethereum is now worth twice as much as your Bitcoin. This sounds like a great thing and any profit is, but you’re suddenly exposed to a huge risk of your portfolio crashing so the advice for anyone in this situation is to take profit. We automatically manage this for you, when a coin sways too much from its intended distribution we will swap it out into the other coins in your portfolio to balance it, we also automatically balance a portfolio when the user deposits or withdraws (in this scenario it would deposit more to Bitcoin to even out the value of both coins).
I ran a 1-year backtest on a buy-and-hold portfolio vs a portfolio balanced every 30 days containing the same Bitcoin/Ethereum split. This resulted in a 17% more profits for the re-balanced portfolio.
I know there were a lot of words in this post so congrats if you made it this far! We’re working very hard to make the product even better and have lots planned. If you have any feedback feel free to get in touch and if you’re not using our product already, check it out!