After being up in the air for a long time, a decision was finally made in early 2024: the US stock market supervisory authority granted approval for a total of 11 Bitcoin ETFs to the world’s leading financial product providers. This was a major milestone, heralding the arrival of cryptocurrencies in the world of mainstream finance.

It also means that cryptocurrencies – just like any other asset class – shouldn’t be viewed in isolation, but instead in the context of your own investment portfolio. So first of all, we’ll take a look at four key steps to follow when investing.

1. Developing a comprehensive strategy
2. Defining market expectations
3. Evaluating suitable implementation options
4. Continuous monitoring and risk management

We’ll then explore how to actually make crypto investments and look at taxes, fees – and emotions.

Developing a comprehensive strategy

A common mistake investors make is allowing themselves to be influenced by the FOMO (fear of missing out) effect and making unstructured investments. Instead, a well-diversified strategy is the key to successful long-term investment. Distributing wealth across various asset classes reduces risk and improves the portfolio’s yield stability. The technical term for this distribution is asset allocation.

In addition to equities, bonds or gold, cryptocurrencies also belong in the mix. They contribute to diversification and open up new opportunities to generate returns.

Successful asset allocation is based on a long-term approach and is not adjusted short-term – even if a cryptocurrency’s value falls over an extended period of time, for example. Provided the investment retains its long-term potential, it shouldn’t be sold prematurely. One example is the performance of Bitcoin, whose price has slumped several times, sometimes dramatically, over recent years – in March 2024, it hit a new all-time high.

Defining market expectations

While strategic allocation aims to maintain a fixed ratio of asset classes, tactical allocation allows targeted adjustment of investments. This enables investors to react to current market conditions and take advantage of short-term opportunities.

This can prove an attractive strategy if, for example, prevailing market opinion suggests the fall in the price of a particular crypto is only a temporary blip. In such situations, it may be worth considering targeted investment, which will prove lucrative if the market recovers and price gains are made.

However, short-term trading requires constant active monitoring of market developments. There’s always the risk of making a mistake, often resulting in worse outcomes than with long-term strategic asset allocation. 

Evaluating suitable implementation options

Both short-term and long-term goals can be achieved with a core satellite approach. The stable core element consists of long-term investments. The satellites are used to take advantage of market opportunities that provide the chance to generate short-term yield. The ratio is usually around 80 percent (core) to 20 percent (satellites).

Key factors in the core satellite approach are risk management and any adjustments. If a cryptocurrency makes very strong gains, it may be wise to realize some of the profit. This brings the weighting of cryptoassets back into line with the original portfolio strategy.

Continuous monitoring and risk management

Investing in cryptocurrencies isn’t without risk. One of the greatest risks of this still relatively new asset class is its high level of market volatility, which can result in sharp short-term price fluctuations. This volatility means there’s a chance of suffering significant losses – or making great profit.

In addition to market risks, there’s also the danger of operational ones, such as fraud, technical faults or hacker attacks, which can result in total loss in the worst-case scenario. To protect against these risks, you can either manage the cryptos yourself in a cold wallet or use suitable implementation options through a well-established financial service provider. Financial service providers enable the buying, selling and secure custody of cryptos. To find out more, read the article “Crypto custody: everything you need to know “.

Diversification within cryptocurrencies

Diversification isn’t just advisable in your entire investment portfolio, but also within asset classes. Investing in various cryptocurrencies reduces the risk of loss if the price of one particular crypto falls. Investing in Bitcoins, Altcoins and tokens also enables you to benefit from specific technologies and trends. Cryptoassets don’t develop at the same pace because they are used for different applications and their market potential varies. Bitcoin is often called digital gold, because its circulation has been limited to 21 million coins. Ethereum, the number 2 crypto, is a bit like an operating system where other projects are based on its technology.

Practical implementation

Before investing in coins and/or tokens, it’s best to do some research and gain an understanding of the market (you can find out about the differences between coins and tokens and read other explanations of crypto terms in the blog post “25 crypto terms explained simply”). You can then implement your strategy, which can be done in various ways. The most common approaches – including their pros and cons – are explained below.

Buying ETFs and ETPs

The first exchange traded funds (ETFs) have been available in Bitcoin in the USA since early 2024. These funds, which can be traded on a daily basis, allow you to invest in Bitcoin without actually owning it yourself. These instruments track the current Bitcoin price as closely as possible.

It’s important to look at the cost structure of these ETFs before investing in them. On top of transaction fees and annual fund management costs, additional charges often apply for trading on stock exchanges abroad. In addition, there are also stamp duty, which stands at 0.15 percent for US ETFs, and, where applicable, inheritance tax, which has to be paid in the USA.

An alternative is exchange traded products (ETPs) in cryptocurrencies, which have been traded on the SIX Swiss Exchange for a number of years. Unlike ETFs, ETPs are not classified as separate assets, which means they present an issuer risk. In other words, if the provider goes into insolvency, the ETPs are part of the bankruptcy estate. To exclude this risk, most ETP providers have taken precautionary measures to protect the invested assets in the event of insolvency.

Direct purchase via bank

To buy cryptos directly, Swiss investors were long reliant on providers abroad, which always entailed a degree of risk. However, direct investments can now be made with some Swiss institutions. PostFinance also provides crypto trading via e-finance and the PostFinance App. 

Buying directly and using your own custody solution

For investors who prefer complete control over their investments, buying cryptos directly – with custody in their own wallet – is the best option. However, this requires some technical knowledge and a degree of discipline to ensure the access key doesn’t get lost.

The best way for people to invest depends on their personal preferences in terms of convenience, security, control and costs. It’s important to check the costs carefully, especially for long-term investments, as they constantly cut into profit.

Role of fees

Annual management fees are charged for financial products, such as crypto ETFs and ETPs. Banks also apply transaction and custody charges. No management fees are incurred when investing directly in cryptocurrencies, whether via a bank or managed independently, which makes this option more attractive in terms of costs. There are no stamp duty or stock market fees on direct investments, either.

However, trading on your own isn’t without costs. Besides transaction fees, there are also network charges, which can be very high during certain periods. These costs don’t generally apply when trading via a bank.

It’s advisable to check fees carefully, especially for long-term investments. A few tenths of a percentage point make a big difference long-term.

Practical advice

Taxation of cryptoassets

By the end of the year at the latest, the question of how cryptos are taxed will emerge. For non-professional traders: any price gains are tax-free for private investors. Cryptocurrencies must generally be declared under “other assets” and are classified as taxable assets. Investors who use banks for crypto trading and custody benefit in this respect: the assets are entered automatically in your annual asset statement, making your tax return much easier to complete.

Don’t allow your emotions to take over

Finally, there’s a rule that’s applied to investment for decades – and is especially valid for a volatile asset class, such as cryptocurrencies: never allow your emotions to get the better of you and don’t trade impulsively. A well-devised strategy means you won’t end up in this situation in the first place. Set clear objectives and guidelines, and use buying and selling strategies based on objective criteria or market analysis. And most importantly of all: always stick to the approach you’ve decided on.