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9 Crypto Investment Tips for New Zealanders (2021)

Cryptocurrencies have gained a lot of traction amongst New Zealanders lately. With Bitcoin reaching highs of NZD $89,000 this April 2021, it’s no surprise that.

Posted April 14, 2021

Illustration of a guy sitting next to a monitor display to illustrate the idea of crypto investment tips in NZ.
Illustration of a guy sitting next to a monitor display to illustrate the idea of crypto investment tips in NZ.

Cryptocurrencies have gained a lot of traction amongst New Zealanders lately. With Bitcoin reaching highs of NZD $89,000 this April 2021, it’s no surprise that many Kiwis are considering investing in cryptocurrency. If you’re one of them, you’ve come to the right place. We’ll be sharing some crypto investment tips in NZ in this article, so stay tuned!

With that being said, what if we told you that there is an asset with a monthly average growth of 73% since October 2020?

When this asset was first available to the public, one unit of it cost less than a Kiwi dollar — now, with just 13 units of this asset, you can buy a house in Auckland in 2021.

It has a supply limit of only 21 million units. Everyone is racing to get as big of a portion of this asset.

So, go buy some Bitcoins now! Buy cryptos and join the new rich! … *queue the overly dramatic fireworks*

Pause, and take a slow, deep breath.

If you were getting hyped up just now, you may want to curb your enthusiasm for a bit.

Unlike some other people, we don’t want you to get too excited for something which you may have a limited understanding of — especially if you’re going to put your money into it. Before you spend a single dollar into Bitcoin or other cryptocurrencies, you should first read through this article.

We give you 9 best cryptocurrency investment tips that all New Zealanders should consider when buying or investing in cryptocurrency.

Learn why crypto assets are valuable

In the earlier days of the crypto world, fewer people owned crypto assets, which resulted in wild fluctuations in their price — people didn’t know why crypto assets were valuable, they just treated them like penny stocks with low price and high volatility.

Now, with large private companies like Tesla and MicroStrategy purchasing billions of dollars worth of Bitcoin and other cryptos, the world is starting to become more confident in the value of crypto assets and blockchain technology.

Our first crypto investment tip — learn about the crypto world. Ask yourself these questions:

  • Why does blockchain technology have potential?
  • Why is Bitcoin and Ethereum so attractive to big investors?
  • What are some of the most promising blockchain projects in development?

Spend at least a few weeks to read up on cryptocurrencies and blockchain technology (Yes, you still have time!).

Learn the crypto space: Click here to explore our resources and topics on all things crypto!

Learn how cryptocurrency is bought, sold, and stored

Beware of scammers! Many people don’t know exactly how cryptocurrency is bought and sold, and where their assets will be stored. Because of this, they fall prey to scammers who claim that they can simply “take your money today and give you high returns tomorrow”.

Instead, get to know some of the trusted crypto exchanges in New Zealand, the average market prices of crypto assets, security tips, and learn all about crypto wallets with concepts such as private key and public key so you know how to store your digital assets safely.

Before you invest a single dollar into cryptocurrencies, make sure you know how to keep track of where your money goes, the amount of crypto assets to your name, where they are located, and how much they are worth in the market.

Related: Read about crypto-friendly banks in New Zealand and their statements in regards to cryptocurrencies.

Prepare your investment funds and risk management strategy

Although the cryptocurrency market is generally liquid, you shouldn’t invest with the money you will need in the near future.

Make sure you have already prepared an “emergency fund” for unexpected expenses. Calculate your monthly expenses as accurately as possible (this includes your lifestyle expenses such as holidays and luxuries).

Also, make sure that you are mentally and financially ready to part with however much money you’re planning to use for the investment. The cryptocurrency market is volatile, meaning that in a single day, a coin’s value may hike up to 10%, or vice versa. You do not want to sell your assets too soon — in the short term, they will not yield substantial returns.

Investors manage risk differently. You may use one or a combination of these investment styles: investing in a lump sum, dollar-cost averaging, or average down investing for advanced traders.

Read more: Click here to learn more about dollar-cost averaging.

Learn to avoid investment pitfalls

First-time investors will likely make one or more of these investment pitfalls:

  • Investing due Fear of Missing Out (FOMO)
  • Hunting for potential price breakouts
  • Panic selling
  • Timing the market
  • Lacking investment diversification

Not all of these actions are necessarily bad. For example, timing the market and breakout-hunting are all useful in the context of crypto trading. However, since you are investing in crypto, these actions may become a hindrance to your long-term success.

It’s important to get to know yourself when confronted with price volatility and risk. Investment success is often determined by your psychology and attitude, much less on how much capital you’re willing to invest, or the instrument of choice. Even wealthy investors can fall into any of the above bad investment habits.

Learn about the New Zealand tax regulations on crypto assets

The crypto realm may be a decentralised, anonymous, and permissionless world, but any time you earn revenue in cryptocurrency it is advisable to keep track of your transactions and follow the Inland Revenue guidelines when filing a tax return. We highly recommend you open a new tab and read through the tax guideline on crypto assets.

That being said, tax obligations still apply to Kiwi citizens who exchange cryptos. “Operating in the digital world doesn’t absolve you from your tax obligations,” said Tony Morris, Inland Revenue Customer Segment Leader. “It also doesn’t mean your activity is untraceable.”

Fortunately for crypto investors, keeping track of purchases is as easy as looking through the transaction history. Crypto traders, on the other hand, would need to sift through page after page of transactions to provide an accurate account of their earnings.

More on tax: Click here to read our cryptocurrency tax guide in New Zealand.

Think about how you will pass on your crypto legacy

Since cryptocurrencies are decentralised assets, no bank or government body (or really anyone else) will be able to access them when you die, at least without access to your wallet’s private key.

It is estimated that around 20% of existing Bitcoins were lost (at the time of writing, they are worth around $200 billion dollars!). This is due to forgotten passwords and death. Losing Bitcoins from the circulation isn’t the problem — the market price will adjust to the increased scarcity. It’s just a shame that an incredible amount of wealth had been lost forever due to negligence.

One common way is to write a memorandum detailing specific instructions on how to access the crypto asset. This memorandum (or access to it) is then entrusted to the beneficiary. It’s necessary to list down the crypto assets in your will for tax purposes, but it’s not advisable to write the access instructions on it as the will is not private.

Follow up on crypto news that is relevant to your investment

There are more than 8000 crypto assets currently in circulation on dozens of blockchain networks. From the very beginning of this article, we advised you to read on as much about the crypto world as your mind can handle.

Sure, there are many jargons and concepts that take time to understand. Not all of them are particularly relevant to you, but it helps to understand some of the latest events concerning your crypto asset, beyond the market price data.

If you’re starting out with popular cryptocurrencies like Bitcoin or Ethereum, chances are you’ll find plenty of news about them, such as the latest institutional buys and record-high market adoption. If you’ve been paying attention to the developments of decentralized finance, you might meet the likes of XRP, Cardano, and Polkadot.

Then there are also the miscellaneous assets that get disproportionate attention, like Dogecoin, simply because a public figure likes to endorse them.

Be consistent and stick to the plan

If you’ve ever held thousands of dollars in Kiwi bonds, you know that you can trust the government that you’ll get your money back plus interest after an agreed period.

This predictability and certainty come with an opportunity cost of not investing in something that could yield higher returns. (At the time of writing, Kiwi bonds pay up to 0.4% in interest annually).

When you take investment into your own hands, such as when buying shares or cryptocurrency, you sacrifice predictability for potentially higher returns. Fortunately, there is a way to provide some structure or a plan to organise your solo investment activity.

Since human beings are generally creatures of habit, investing on a specific date each month, or even setting up an Auto-Buy order, where you create an automatic and diversified buy order, are a couple of ways to be consistent with your investment efforts.

Regular investing is effortless and emotionally more pleasant. Don’t just take our word for it — try it!

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Last updated November 23, 2021

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