Potential for growth
Some crypto-assets have risen a great deal over the years, and people hope for the same again. But they have also fallen by half or more in a matter of months, and many have disappeared. Past growth says little about the future.
Crypto basics and why people invest
A plain-language introduction to crypto-assets: what they are, why their prices move, what volatility means and how to think about risk. Written for people who are curious but new.
Who this page is for
This page is for anyone who has heard about Bitcoin or Ethereum and wants to understand what they are dealing with before they put money in. You do not need any background. If a word is new to you, it is explained here the first time it appears.
General information only. This page is educational and is not an investment recommendation. Nothing here guarantees a return, and crypto-assets can lose value quickly, including all of it.
People invest in crypto-assets for different reasons. Some want exposure to a new asset class, some like that the market never closes, and some want to spread their money across more than shares and property. None of those reasons makes the risk go away, and you should have your own.
What are crypto-assets?
A crypto-asset is a digital record of value that exists only on a shared computer network. It has no coins or notes, no central bank behind it and no single company in charge of it. Ownership is recorded on a public ledger called a blockchain, which many computers keep in step with one another and which is very hard to alter after the fact.
Key terms
| Term | Plain meaning |
|---|---|
| Crypto-asset | A digital asset such as Bitcoin whose ownership is recorded on a blockchain. |
| Blockchain | A shared ledger, kept by many computers, that lists every transaction in order. |
| Exchange | A marketplace where crypto-assets are bought and sold for other assets or currency. |
| Wallet | Software or hardware that holds the keys proving you own an asset. |
| Supply and demand | The number of units available against the number of people who want them, which shapes the price. |
How a transaction works
- RequestYou ask to send an asset to another address.
- BroadcastThe request is sent to the network.
- CheckComputers on the network confirm it is valid.
- RecordIt is added to the ledger and cannot easily be undone.
Because a confirmed transaction is difficult to reverse, a mistake such as a wrong address can mean permanent loss. That is one reason to move slowly and check details.
Why do some people invest?
Here are three reasons people give, each with the caution that goes with it.
A different kind of asset
Investors who already hold shares and property sometimes add a small share of crypto-assets for variety. Keep that share small, because in a market-wide fall, different assets can drop together.
Open at all hours
You can act at any time, not just during business hours. That convenience also means prices move while you are asleep, and there is no closing bell to give you a pause.
Why do prices change?
Prices are set by the buyers and sellers who are active at any moment. When more people want to buy than to sell, the price tends to rise, and when more want to sell, it tends to fall. Five factors influence how that balance shifts.
| Factor | How it can move prices |
|---|---|
| Trading volume | High volume means many participants and usually a smoother price. Thin volume lets a single large order move the price sharply. |
| News | Announcements about regulation, exchanges, security incidents or major companies can trigger fast buying or selling. |
| Investor sentiment | Confidence and fear spread quickly online. A mood shift can push prices well beyond what the facts would justify, in either direction. |
| Economic conditions | Interest rates, inflation and the strength of the Australian and US dollars affect how much money is willing to take risk. |
| Global events | Markets are linked around the clock. A shock in one region can show up in crypto-asset prices within minutes. |
How a price change forms
- Something happensNews, a large order or a change of mood.
- Traders reactSome buy, some sell, some wait.
- Orders meetBuy and sell orders are matched on the exchange.
- The price movesUntil the balance of orders settles again.
What is volatility?
Volatility is how much and how fast a price moves. A calm asset drifts up or down slowly. A volatile asset can rise or fall by several per cent in an hour. Crypto-assets are usually much more volatile than shares or currencies, which is where both the appeal and the danger come from.
A useful way to picture it: a calm asset is like a lake on a still day, and a volatile one is like the sea in a storm. Both can carry a boat, but you would prepare for them very differently, and you would not put out onto the second one with more than you could afford to lose.
For you, the practical consequences are simple. The value of your account can change a lot in a short time. Losses can arrive faster than you expect, and staying calm matters. Plan for the low points as well as the high ones.
| Higher volatility | Lower volatility | |
|---|---|---|
| Price moves | Large and fast | Small and slow |
| Possible gain | Larger | Smaller |
| Possible loss | Larger | Smaller |
| Predictability | Low | Higher |
| Typical example | Smaller crypto-assets | Major currencies |
What is risk management?
Risk management means deciding in advance how much you can lose and building simple habits that keep you inside that limit. It does not remove risk. It only makes it something you have chosen.
Principles that help
- Commit only money you can afford to lose.
- Spread your money across more than one asset.
- Decide your limit before you start, not while prices are moving.
- Review regularly and adjust if your situation changes.
Tools AvenQuant gives you
- A choice of strategies described in plain words.
- Alerts that tell you when conditions change.
- The ability to pause a strategy at any time.
- A risk pause that can stop trading in disorderly markets.
These tools support your decisions. They do not make investment decisions for you, and they do not guarantee any result. The full list of risks is on the Risk disclosure page.
Questions beginners ask
Is crypto the same as money in my bank account?
No. A bank balance in Australian dollars is a claim on a bank and, up to a limit, is covered by the government deposit guarantee. Crypto-assets are not legal tender in Australia, are not covered by that guarantee and can change in value very quickly.
Do I need to understand blockchain to use the platform?
No. It helps to know the basic idea, which this page explains, but you do not need technical knowledge to use the dashboard. Your personal manager explains what you need to know at each step.
Why do prices change even when nothing seems to happen?
Prices move whenever the balance of buyers and sellers changes, and that can happen because of a large order, a rumour, a move in another market or a shift in mood among traders. Often there is no single clear reason.
Does the platform remove the risk?
No. It automates analysis and orders and can pause trading in disorderly conditions, but it cannot remove market risk or guarantee any result.
How much should I start with?
Only an amount you can afford to lose. Many clients begin with the minimum for the Basic plan and increase later, if at all, once they understand how the platform behaves.
Ready for the practical side? Follow the getting started guide, or see the Cryptocurrencies page for the assets the platform tracks.