Investing in Decentralized Digital Currencies
One interesting characteristic of a cryptocurrency is its secured system called cryptography. This allows peer-to-peer transactions without the use of any third party and makes it impossible to manipulate or hack. Cryptocurrencies are decentralized and can be used as payment or exchanged for fiat and other digital currencies. But despite all of its potential, when it comes to cryptocurrency investing, it’s essential to recognize that the value of cryptocurrencies go through significant changes and popular cryptocurrencies have the tendency to crash because they are more volatile.
As of 2018, there are over 1,500 coins in existence and everyday new coins are created. It’s difficult to tell which ones will be winners and which ones will be losers, but there are certain factors that help determine which ones have the most potential. Despite this, always remember that even with all the research in the world, cryptocurrencies are inherently risky, so only invest an amount you can afford to lose.
Factors that Determine the Success Rate of a Cryptocurrency
First, a cryptocurrency that has a large circulating supply and has maintained an affordable price could be worth looking at. Second, the team behind a cryptocurrency should have a white paper that is clear, well put together and appealing to investors. Third, cryptocurrencies that tackle real-world problems using the blockchain are more popular amongst investors.
Early Investors Get Higher Returns
Investing in coins during the early stages while it’s still in the fringes will generate the highest returns since they haven’t reached the peak in popularity yet and prices are still low. Cryptocurrencies that were worth a lot but took an unusual plunge cannot get back to its previous position. Unless the price drop was due to an overall negative market sentiment. Investing in these type of coins requires a high risk-tolerance and a proven track record on the cryptocurrency and the team behind it. Lastly, some cryptocurrencies like Bitcoin, Ethereum and Litecoin have been on the market for a long time and are seen as safe investments relative to the rest of the market.
Do Your Due Diligence
In the crypto world, it’s important to study and learn all about it before making any investment decision. The markets are unpredictable and risky but also full of opportunities. A lot of information come out every day from credible sources but also fake sources. So be sure you are up-to-date and getting the correct information and not FUD (fear, uncertainty and doubt). Consider the team behind that coin, the functions and capabilities of that coin and the issues or problems they want to solve. These will help you when choosing the right cryptocurrency to buy. Investing in cryptocurrencies require time and attention, not to mention stamina to deal with severe market volatility. If you don’t mind the major fluctuations that happen every day and are investing for the long-run, then investing in cryptocurrencies might be for you.