(P) Cryptocurrencies are here to stay! How can you profit from them?
Cryptocurrencies are a long-term investment opportunity for both individual investors and companies, not a get-rich-quick scheme, is the conclusion of the NRCC Investment Opportunities: Cryptocurrency webinar organized by the Netherlands Romanian Chamber of Commerce (NRCC) on May 11.
While experts believe there’s a lot of growth potential ahead for cryptocurrencies as more users discover their advantages, they warn that new investors in crypto-assets must educate themselves about these instruments and their risks before jumping in.
“If you don’t have Bitcoin, this is the right time to buy. There’s still a lot of growth ahead. But you need to be patient,” said Constantin Rotariu, co-founder and COO of Bitcoin Romania. He recommends an investment period of minimum three years to those who want to get into Bitcoin.
“Cryptocurrencies and crypto-assets represent a long-term opportunity. This universe is growing rapidly. But you need to invest in educating yourself about crypto-assets and their risks and benefits. This is not a get rich quick scheme,” added Michael Huertas, Partner & Co-Head of Financial Institutions Regulatory Europe at Dentons law firm in Frankfurt.
Cryptocurrencies and blockchain technology also represent an opportunity for companies, not just individual investors, according to Maarten Oonk, Director Deloitte Center for the Edge. “From a corporate perspective, you shouldn’t just jump on the bandwagon. Find the benefits that are best for your company and how you can use this technology most efficiently,” Oonk said.
What are the benefits of investing in cryptocurrencies?
The biggest advantage of a cryptocurrency such as Bitcoin is that it is decentralized and doesn’t depend on any entity or state, unlike traditional (fiat) currencies that depend on states, explained Constantin Rotariu, Founder and Owner of Bitcoin Romania. This eliminates the inflationary factor of fiat currencies, where central banks can print more money, and the existing money in circulation loses its value.
“Cryptocurrencies come in a limited amount, which means their value will only grow as more individual investors move into these assets. Bitcoin is an alternative to place our money on the long term and protect against inflation,” said Rotariu.
In the case of Bitcoin, the current amount of coins in circulation is about 18.7 million, and the maximum supply is 21 million coins, which should be reached after 2100. Thus, the number of new Bitcoin created will continue to decline until the maximum limit is reached. Meanwhile, the demand will continue to increase as more investors will move into Bitcoin, Rotariu explained.
“Bitcoin was the first blockchain project, and it appeared after the financial crisis of 2008 caused by the financial system. It aimed to provide an alternative to the current financial system, where not everyone has to pay for the mistakes of a few. While in its early phases, Bitcoin attracted a few libertarians and Silicon Valley investors, in recent years, large public companies started to invest heavily in Bitcoin. Imagine if these large corporations place only 10% of their cash reserves in Bitcoin,” said the Bitcoin Romania co-founder.
“Bitcoin will likely continue to grow at an exponential rate because it is a scarce asset,” added Maarten Oonk, Director Deloitte Center for the Edge. However, he believes that there’s an even biggest opportunity for companies to use cryptocurrencies and the new blockchain technologies. “Companies can tokenize part of their assets, which opens the way for decentralized ownership of assets,” Oonk added.
What are the risks of investing in cryptocurrencies?
The biggest risks associated with investing in cryptocurrencies are linked with the lack of knowledge and the wrong perception that crypto assets can make you rich quickly, the experts warn.
One of the challenges of investing in cryptocurrencies is keeping them safe. Cryptocurrencies are stored in wallets that are encrypted and can only be accessed and by their owner. However, someone who loses the paper wallet or the key to access an electronic wallet risks losing access to his crypto coins. This is a big difference compared to traditional bank accounts, for example, where the owners can access the money even if they forget the PIN number of their card.
“It’s important to learn how to safely use these wallets so that you don’t lose access to your coins. There are also professional custodians who help you keep your cryptocoins safely. A good custodian has tools that help you create a safe wallet without having access to your funds,” explained Constantin Rotariu.
However, unlike traditional banks, these custodians are not regulated, and nobody guarantees that you can recover the money you keep with them if they go bankrupt, like in the case of traditional banks. This is why it’s important to do your homework before choosing a provider of such services.
Another important aspect is to learn the different uses of each cryptocurrency or token because not all of them serve the same functions. “Bitcoin is not for payments. Its role is to store value. It has technical limitations, which make it unsuitable for payments. But there are many cryptocurrencies now that fulfill that role,” said Constantin Rotariu.
What about taxation?
States and financial regulators are struggling to keep up with the fast development of cryptocurrencies and crypto assets. This is why, in many countries, it’s still unclear how these instruments are classified and taxed. However, the states are taking steps towards regulating these instruments, and investors should be aware of the developments not to get caught off guard.
“While for traditional financial assets, you are required to declare capital gains and pay tax on income, things are more complicated with cryptocurrencies. In Europe, we currently have 27 different tax regimes for crypto and digital assets,” said Michael Huertas, Partner & Co-Head of Financial Institutions Regulatory Europe at Dentons law firm in Frankfurt. “That is set to change by 2024 when the EU will pass MICA, a regulatory framework for crypto-assets, which will turn the EU into the largest single market for crypto assets. They will be treated as financial instruments and regulated. Hopefully, MICA will also bring more clarity on how these assets should be taxed and when,” he added.
How do Bitcoin ATMs work?
While professional investors have a multitude of sophisticated platforms they can use to invest in crypto assets, the easiest way for small individual investors to get into Bitcoin is through Bitcoin ATMs. “All you need is to install a wallet app on your smartphone. Then you put the money (lei or euro) in the ATM, and you get Bitcoin in your wallet. To withdraw, you scan the wallet and take out cash,” explained Constantin Rotariu, co-founder and COO of Bitcoin Romania. His company installed the first Bitcoin ATM in Romania in 2014 and currently operates close to 100 such machines directly or through partners. “We plan to add another 200. Local companies can take a franchise for an ATM. It is a lucrative business, profitable for both parties. The profit from operating a Bitcoin ATM is between EUR 1,000 and 5,000 per month,” he said.
The NRCC Investment Opportunities: Cryptocurrency webinar organized by the Netherlands Romanian Chamber of Commerce (NRCC) together with Bitcoin Romania, Dentons and Deloitte Romania as main sponsors, was attended by over 80 company owners, financial advisors, CEOs, CFOs, private investors. Romania Insider was the main media partner for this event. Watch the event recording here.
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