9 Crypto Investment Tips for New Zealanders (2022)

Cryptocurrencies have gained massive traction lately. It’s no surprise that many Kiwis have really considered crypto assets as a way to diversify their investment portfolios.

Investing in anything, especially crypto, has its risks as well as benefits. To minimise these risks, we’ll give you these crypto investment tips and best practices that anyone can do at any level of experience.

Tip 1. 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 are 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.

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

2. 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 say, “We’ll 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 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.

3. Prepare your investment funds and risk management strategy

The cryptocurrency market is generally quite volatile, so you shouldn’t invest with the money you will need in the near future, just in case prices fall more than what you’re comfortable with.

Before investing in anything, it is wise to 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.

One investor manage risk differently than the other. We simply can’t recommend you one strategy that will be the most fit for you. Although, 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.

4. 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.

5. 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.

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

6. 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. It’s a shame that an incredible amount of wealth had been lost forever due to negligence.

So, if you are thinking of storing your money’s value in crypto for your children, for example, please talk to a qualified financial advisor.

7. 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.

8. 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 upon 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 (with given additional risk). Some of these risks are evident in the market volatility.

Simply, if prices go down, and you panic sell, you will realise the risk of loss due to market volatility. But if you stick to your investment plan, and if prices recover, you will realise the benefits of investing in a riskier asset.

9. Start with our written guides and newsletter

Tired of sifting through irrelevant crypto news or feeling overwhelmed by all the information on the Internet? Sit back and let us simplify things for you.

Start with this website, subscribe to our monthly newsletter, and gain more crypto knoall in plain English.

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