Investing In Cryptocurrencies
Cryptocurrencies are currently one of the most exciting trends across the world. Blockchain, the underlying technology behind cryptocurrencies, is a tremendously disruptive force, which would change the way we exchange value with each other, globally. Cryptocurrencies trend is still in its nascent stage, and it’s like Internet revolution in the early 90s. The world is still trying to understand the impact and its applications, and its real power is yet to be comprehended thoroughly. The Yahoo, Google and Microsoft of Cryptocurrency world are still to arrive the scene.
Only 7–8% of the world population understand the concepts behind cryptocurrencies. Most of the people are either too scared, due to volatility and lack of knowledge, to get involved; or are investing only out of fear of missing out (FOMO). People are still trading cryptocurrencies as commodities, and their real powers as currencies and utility tokens are yet to be achieved.
Across the world, with acceptance and necessary regulations, cryptocurrencies industry is now starting to see institutional investments, which brings in the required liquidity and maturity, making it safer for individual investors.
There are quite a few investment opportunities in the cryptocurrencies market, and each comes with its own associated risks and returns.
The fundamental principle to follow is only to invest what you can afford to lose. Cryptocurrencies are currently highly volatile, and for some that provide an opportunity to invest, but it comes with risks.
The safest bet out there would be investing in the top 8 to 10 coins, like Bitcoin, Ether, Litecoin etc. But even that should be done after assessing your own risk appetite and expected returns.
Another way could be investing through funds, indices or brokers, wherein you rely on knowledge and experience of the experts.
One of the most exciting and rewarding areas is new coins, through Initial Coin Offerings. But they are quite risky, as they are like start-ups and 9 out of 10 will eventually fail. So, when investing in new coins, proper research should be done. The key aspects which need evaluation are -
1. Team — who these people are, their profiles, industry experience and most importantly, whether these people exist or not.
2. Idea — How strong or revolutionary the concept is and do you understand it. Only invest in something which you honestly believe in.
3. Market — Does the idea belong to cutting-edge technology, like Artificial Intelligence, Virtual Reality etc.? Or does the idea belong to an already saturated market, with a lot of competition.
4. Execution — Idea is essential, but the implementation is what matters the most. You should look at what has already been achieved thus far. Enquire if a prototype or any other artefacts have been published for public scrutiny.
5. Funding Targets — Any company trying to raise more than 30–40 million dollars is usually unrealistic. One should pay close attention to the proposed use of the funds. Question them if they need that much. How much of the funds have the team allocated to itself?
6. Communications — How accessible is the team on various forums. Join their forums and ask difficult questions and see how they react.
Finally, do as much research as possible and don’t go by the scores on rating sites only. Have a discipline to say No. Everything sounds very exciting, but remember 9 out 10 ideas would fail. So, research, research and research!
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