2017 was an exciting time for cryptocurrency as market cap increased from 18.3 billion to 612.9 billion by December. This leaves the general public wondering whether they are missing out by not investing in cryptocurrencies in 2018. In 2017, the first cryptocurrency, Bitcoin, increased in value from lower than $1000 to value close to $20,000 to knock out even the highest-performing stocks in the US.
For those who are unfamiliar with the term cryptocurrency, it is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds via the blockchain technology without the use of a central bank. This decentralization attract many who have lost trust in the central bank.
This became possible by the use of blockchain technology, which was invented in 2008 by Satoshi Nakamoto for Bitcoin specifically. With the Bitcoin success, others have found use for blockchain from supply chain to copyright protection to cryptocurrency.
Blockchain is a ledger that is incorruptible. Like its name, blockchain is a chain of blocks of recorded info. The blocks of information are then continuously reconciled and shared across the network to keep it public and verifiable, so there is not one place a hacker can go to corrupt the information. Blockchain can also be used as the basis for documentation and contracts regarding property ownership, to expedite power transactions between people, or to store and track election votes. One of the most important benefits of Blockchain is the fact that it is a decentralized distribution system. Seeing as the database has multiple copies, there is no particular point of failure as all the database copies work in harmony to confirm each other’s precision. The network verifies each new blockchain transaction, making blockchain an exceptionally credible and secure accounting system.
Knowledge of blockchain isn’t essential to investing in cryptocurrency. Here are the various of ways to start:
Investing in Cryptocurrency
It is the most important to determine how you are going to invest in cryptocurrency. There are many types of strategies and different ways in invest in this field. Due to the risks associated with cryptocurrency, you want to invest with money that you are ready to lose. There are different strategies from buying to mining. If you are risk tolerant, cryptocurrency is the best investment.
Buying and Holding
Buying cryptocurrency and hoping its value appreciates, otherwise known as HODLING*, is the most common way to invest in it. It is being hopeful that the value of the cryptocurrency is at the lowest during your purchase and will continue to rise until you sell.
Before buying and holding cryptocurrency you should consider the following tips first:
- Again, it is never a good idea to invest more money into cryptocurrency than you would be able or willing to lose. Investing in cryptocurrency is a risky affair and you should think of this fact at all times.
- Always make sure that you move your cryptocurrency into your personal wallet after buying and avoid keeping them at the exchange. A paper wallet works just fine if you are unable to afford a hardware wallet.
- Always buy your cryptocurrency from a reputable exchange.
- Buy a fixed amount of cryptocurrency daily, weekly, or monthly i.e. Dollar cost averaging, as opposed to buying all of them in one trade. Doing this allows you to average the price over the span of a year.
- When purchasing a new coin from an ICO, always research on who is behind the project. Always make sure they are reputable people and double check their Linkedin pages to make sure they are real people.
Initial Coin Offerings, ICOs
Initial coin offerings are new coins being offered to the public. ICO is an unregulated way to raise funds for projects and startups. In 2017 alone, there was $5.6 billion raised via ICOs. And on average, the ICO tokens have returned 12.8x the initial investment in dollar terms.
This sounds great, but there is actually no official list that keeps track of all the ICOs.
As with the other existing coins, you could learn about it from Bitcointalk forum. There is also an ICO calendar on Token Market. For the more visual people, there is Coinschedule. The most comprehensive list has to be Smith+Crown.
Trading your cryptocurrency involves actively trying to buy it at a lower price and then selling it back within a short interval at a higher price. In order to trade successfully, you need to have sufficient practice and knowledge of the trading market, which has sharks waiting to eat up any rookies coming in and throwing away their money. Make sure to join and read up on Reddit subgroups and forums to make sure you are not buying only on hype trains.
Mining cryptocurrency is another way to invest in it, but over the past few years, it has only proven to be profitable when done at a larger scale. This involves gaining access to free electricity or cheap electricity as well as high-priced mining equipment. It is actually more cost effective to buy cryptocurrency with that money as opposed to buying mining equipment with it. There are sites that enable people to mine cryptocurrency through them and this process is referred to as cloud mining. Such sites are categorized into:
- Those that are merely bad investments as buying the cryptocurrency with this money as opposed to paying the site is more likely;
- Those that are fraudulent and will evade with your funds without using it to actually mine the cryptocurrency;
- Those that use visitors’ CPU power to mine cryptocurrency.
High Yield Promising Pyramid Schemes
High Yield Investment Programs or HYIPs are companies or sites with claims that they can double your cryptocurrency while giving you unreal daily interest on it by helping you invest it in an ambiguous scheme. Such sites usually work by collecting money from various people around the web promising good returns. They pay these returns using money acquired from new sign ups essentially generating talk around the site. They may also incorporate a referral program so that users can recruit others. This continues for a few months until the website just goes offline, one day with your money. This means no payments will no longer be made to the users. This is a very risky pyramid scheme that new cryptocurrency investors need to avoid.
If you have a lack of cash to invest in cryptocurrency, a little patience can help you get started. There are sites otherwise known as crypto faucet to get you started. Crypto faucets give out free coins. They are websites to claim in a period of time some amount of coins in exchange of clicking on ads or rolling some dice. This is to get people to be used to the idea of cryptocurrency as well as providing ads for new ICOs.
When it comes to investing in cryptocurrency, a majority of people are still skeptical of this new technology because obviously people fear what they do not know. As a general advice, please only invest with money you could afford to lose. Never take out credit card loans or refinance your home to take a risk in the cryptocurrency world.
We are addressing several market problems, that include the lack of investment instruments and liquidity in crypto market, of a single platform to trade conventional and digital assets, and a general disconnectedness of traditional and crypto markets to name a few. We will offer a hybrid trading platform to trade financial assets, such as stocks, commodities and currencies and digital assets, such as cryptocurrencies and crypto-shares, at a low cost in a legally appropriate manner.
lllustration by Marina Demchenko (Mamihlapinatana Studio)