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What you need to know about the stock market in 2021 | bestbrokers.co.uk

What you need to know about the stock market in 2021

Did you miss out on a Bitcoin investment last year? Are you hoping to make up for it in 2021? As you are probably aware, those who bought Bitcoin in Q4 2020 already made a profit of +160% by mid-February. So, a $20,000 investment would now be worth over $50,000.


This is a companion discussion topic for the original entry at https://www.bestbrokers.co.uk/blog/2021/04/29/what-you-need-to-know-about-the-stock-market-in-2021/

There are some very useful pointers there I particularly liked the strategy of weighted average of progressive and automatic investing.

But what if you are set on investing in Crypto - what are the options?

There are different ways to gain access to crypto each with different fees and risks. You may set up your own wallet or invest in a closed end fund such as The Grayscale Bitcoin Trust (GBTC). Alternatively, you may wish to be invested in an active managed fund such as the one I have been overseeing now for the last four years.

Clearly doing it yourself presents problems in terms of keeping your passwords safe but also to pass on to next of kin and to diversify your credit risk to custodians. You can get around this issue by trading in a closed end passive fund. Many people have invested at an average premium of 16% retaining daily liquidity and more sophisticated have invested at parity in exchange for a 6 month lock up.

However, at some point all these closed end funds go out of favour and trade at a discount to reflect the costs in terms of a number of years of fees. For example, if you discount 2-5 years of fees then GBTC with 2% fees will trade at 4-18% discount at some point. Note that open ended funds (such as our Digital Currency Fund) always trade at net asset value (NAV).

However, the above strategies still have several flaws. For one, crypto trades continuously but you may not wish to spend every hour monitoring the news and price fluctuations. Worse still GBTC and futures contracts only trade on business days so only 69% of the year.

Secondly the extreme volatility means you need to have clear exit plans in mind to take profits or even for the long term holders you will need to rebalance as a portion of wealth. Having a co-investor such as ourselves suggesting profit taking levels is extremely helpful.

In the previous bubble in late 2017 we advised and took profits at an average price of $14,600. The price subsequently fell as low as $3,400 at which point in 2019 we suggested reloading in advance of the next halving event and potential rise. We advised clients to take profits recently at $40,000 just before a fall to $32,000. Clearly, however, the market is higher than that as I write today.

Many experts predicted that Bitcoin Cash, Litecoin, Ethereum, Ripple and others would be the dominant force. We also monitor the Blockchain space, which is very transparent, to spot any potential alternatives. Our analysis has been very critical of Bitcoin Cash, down 99% versus BTC I also have a mistrust of Ripple, down 70% last year when Bitcoin tripled. You need to ensure you have 365 day access, so you can have a helpful exit door and maintain exposure to the best crypto currency.

Finally, the most important reason for an active approach is that no one knows who the ultimate winner will be in the crypto space. Will it be Bitcoin or something else?