As Senior Manager and Assistant Manager of the Guernsey Digital Asset Team, we firmly believe the best way to develop an understanding of cryptocurrency is to try investing for yourself, with the caveat that you should only ever invest what you can afford to lose.
From forgotten passwords and lost keys, to phishing scams and the collapse of cryptocurrency exchanges, notably the collapse of FTX, losses in the digital asset word are – for the most part – irrecoverable.
When Saffery Trust’ Guernsey office was first approached by a client looking to invest in cryptocurrency in 2017, the firm was not in a position to support them immediately. Instead, the firm started investing time and resources researching, building relationships with trusted, specialist advisers, establishing digital wealth structuring options and creating a dedicated Digital Asset and Cryptocurrency Team. Alongside being founding members of the team, we both invest in cryptocurrency personally.
Actively managing our own digital assets was, and remains, a hugely important part of understanding not only the market, but also our understanding of our clients’ journeys. In the same way that we would be unlikely to trust a mechanic who has never driven a car, we would not trust our cryptocurrency with anyone who did not have personal experience of the market, so we understand that many of our clients feel the same way.
Without prior investing experiences, investing in cryptocurrency has been a steep learning curve. Some of the important lessons we have learned, which have helped our understanding of our clients’ needs, are detailed below.
Ease and risk have a positive correlation
Often the easier the platform is to use, the higher the risk of cyberattacks or having your assets co-mingled with the funds of other customers or the exchange you are using. The more secure and personalised the solution, the harder it is to use, for example Hardware Security Modules .
It takes a lot to get a lot
Unless you happen to hit the right opportunity – which will likely be down to luck for first-time investors – you’ll likely need to invest substantial sums of money to see significant returns. Similarly, you need to invest a great deal of time if you are looking for quick gains. Investors who see significant gains are extremely skilled and often have a base knowledge in traditional investing. Whether you’re frequently transacting with crypto, or intend to use the “HODL” strategy (Hold on for Dear Life), you need to give your holdings a bit of TLC. There are often protocol updates requiring your actions, reward offerings or staking returns to collect, so keeping abreast of requirements is essential.
Research is invaluable
While it may be tempting to follow trends without much thought, undertaking independent research, for example following Twitter and Discord forums, can be much more beneficial for both your understanding of the market and potential gains. It is important to be wary of following the crowd or celebrity endorsements, these may not be what you expect them to be.
One size does not fit all
One of the biggest advantages and simultaneously biggest risks of blockchain technology is that it is immutable. If you make the fundamental mistake of transacting through a blockchain which does not support your cryptocurrency, you will lose your coins with no way to recover them. We invested time in figuring out how to bridge across blockchains and using this method to reduce Gas (the fees required to transact) and found it hugely rewarding when that research paid off and we were able to complete these transactions successfully, without trial and error.
The lessons we have learned on our personal cryptocurrency journeys have already proven invaluable in understanding our clients’ needs and enable us to ask the right questions at the right time.
Find out more
WATCH: Our Crypto Catch-up video series explores the role of a trustee and how their services can play a role in protecting digital assets, and potential barriers that can have an impact on investors.
Contact us for more information on how we can facilitate the off-ramping of your cryptocurrency.