The global economy is inevitably going paperless. This digital move was fairly increased by the pandemic and the economic restraints. For most of us this change it’s not frightening. It’s kinda useful to get off all the papers, documents, and even cash and get them digitalized. But for others to accept or comprehend than transmuting a string of numbers in a computer into something of value it’s odd. This change means no physical coins or bills — all online. We call it now digital money or cryptocurrency. As many of them went mainstream, they appear to pass from something weird to an accepted financial tool with real value. Intended to be the people’s currency. All records kept in a way decentralized, distributed, and immutable using a technology called a blockchain. Currently, there are more than 7,000 cryptocurrencies, and it’s not easy to choose between them. You can buy one with a credit card or, in some cases, get through a process called “mining”. No government or bank controls how they’re produced, what their value is, or how they’re exchanged. As a result, they worth whatever people are willing to pay or exchange for them.
Just like precious metals or stocks, the value of financial goods depends on whether we believe they are valuable or not. Let’s take gold as an example: his well-accepted intrinsic value is not really based on how it’s used. His price is determined by the market, of what people are willing to pay for it as a financial instrument. This is exactly the same on cryptocurrency. Yet one question is still valid, can we trust cryptocurrencies? Until today we got 2 defined groups — believers and nonbelievers. For believers may indeed be a temporary mania based on the idea of getting rich without work. For non-believers is only a fraud scheme. But in 2017 we had a big hype in the market that changed all. It was the year that saw the market capitalization of the industry rise from $18 billion to $800 billion. Bitcoin alone gained over 1300% dislocating from others and starting to emerge as an alternative to the usual currency in its own right. After this disruption believers and owners of cryptocurrency started to invest in bitcoin because they saw it as a store of value, and a useful portfolio asset. Ex: if you invested $1,000 in bitcoins at 8 cents per coin in 2010, your cryptocurrency investment would be worth $287.5 million today. No wonder Bitcoin has captured so much interest. (Traders are saying will get to $200.000 per bitcoin in the next years.) Also, the announcement of Pay Pal in 2020 that they will accept BTC (bitcoins) and other coins as a form of payment and Tesla’s owner investing $1.5bn in BTC as a way to diversify from the dollars made public trust explode into gaining wider acceptance. (Square, the payments company, bought bitcoins worth $50 million in October 2020 and MicroStrategy spend over $2.1 billion buying Bitcoin.)
But before you say good-bye to your dollars or euros there are a few things you need to know:
- The volatility is high — goes through extreme ups and downs. Someone tweets and the price drops!
- We don’t know all about them. Nobody even knows who the founder of Bitcoin is! Get all the pieces of information to decide if you go in or not.
- The crypto can be used for fraudulent activity. If someone wants to commit cyber activity and avoid being tracked, the crypto world is an ideal place for it.
- Unproven rate of return. Without any tie to regulatory standards, there’s no pattern to the rise and fall of their value.
Top Crypto by investment risk (8 March graph)
Crypto has value because enough people feel crypto has value. While generally speaking the value of these currencies is, like anything else, linked to supply and demand, it is often difficult to determine what exact factors influence this incredible inconstancy performance. Experts believe recent jumps in the price around crypto have been due to a wave of money from both institutional and private investors. So if you wonder about what crypto to invest in recently my advice is to be careful. Ponder first whether it’s worth it. My suggestion for traders or any other is to exercise higher caution and do their homework. Also, there are people who will still debate if cryptocurrencies are a Ponzi scheme. Not going into that at all. Some others are buying today and have no idea what they are doing and when the price drops they freak out. Avoid them or anyone who promises you a guaranteed return or profit. Just because an investment is well known or a celebrity endorse it does not mean it is good or safe. And the most important Don’t invest money you can’t afford to lose.
In order to make a wise decision check first:
- Historic performance = How old is the cryptocurrency, and what is the general performance since developed? If he has shown consistent growth for at least 3 years, it could be worth closer attention.
- Market Cap = Verify if they have a high market cap and value. Means stable liquidity ensuring easy to buy and sell.
- Technology = the major drivers of worldwide adoption.
- Limited supply = the scarcity and if would ever be minted.
A cryptocurrency’s value can change by the hour. An investment that may be worth thousands today might be worth only hundreds tomorrow. So check everything more and more. And if you can’t explain your investments to a 10-year-old child, you have no business investing at all. If you do invest, be prepared to lose some or all of your money. As with any investment, do due diligence and don’t pin all your hopes on one cryptocurrency: spread your money around.
Top Crypto by technology (8 March graph)
Is there a really less risky way in crypto? No.
Since 2009, along with big ones a wide range of challenger cryptocurrencies (Litecoin, Dogecoin, EOS, Stellar, OMG, NEO, VEN, Lisk) dubbed altcoins, have arrived on the scene. These smaller altcoins are even more volatile than Bitcoin. If anything, they are really speculative investments. Some got momentum others died abruptly. (almost 1000 died) Besides, we have also “stablecoins”. They are a little less risky cause they have actual assets behind them, like regular currencies. DAI and TUSD are two of them, which are both backed with the US dollar. (one coin is worth $1) Furthermore less risky is also to make long-term investments in the companies associated with crypto. Shares in Facebook, which is planning to launch a currency called Diem this year (formerly Libra), or JPMorgan, which has the digital JPM coin that is equal in value to the US dollar. Also, we are starting to see strong growth in the innovative areas of digital assets, like decentralized finance (DeFI). An umbrella term for a variety of digital assets and financial smart contracts that substitute traditional financial intermediaries. The total USD value locked in DeFi products has grown from just $1 billion to $39 billion.
The most medium acceptance and investments are still in the big 2 market cap: Bitcoin ($910bn), Ethereum($179bn). (March cap data) Moreover, Cardano’s ADA is one of those coins grabbing the alt-attention in the investment space. Since the start of 2021, Cardano has jumped more than 570% and is now one of the top three cryptocurrencies by market capitalization. After the last fork, he can support DeFi, smart contracts, and NFTs. Users can create their own tokens — which means anyone can send coins to another without the need to register users. An extra interesting thing about Cardano is his vision for enterprise usage, especially in Africa. Why Africa would you say? Cause International Monetary Fund (IMF) estimated that the top five of the world’s fastest-growing economies would be in Africa. (Ethiopia case with a crypto adoption population of 70% under 30 age) Moreover, one that grabbed the attention is Brave and his browser. Their token reward system is designed to put a value on user attention. Another interesting one is Elrond Gold who doubled its price after the blockchain company launched an app called Maiar in 2021, which allows users to buy and transfer cryptocurrencies using just the recipient’s phone number. The app reached over 100,000 users in just one week. And of course, ENJ who has a massive gaming network and gaming has grown over the past few years. With little competition and Efinity launch, ENJ is possible to establish itself as a gaming juggernaut.
Therefore cryptocurrencies carry the groundbreaking potential to disrupt all currencies and to make new millionaires from thin air. But when you’re trying to gain a position, in such a volatile market it might be convenient to express doubt and suspicion on any news you heard. Especially when “whales” investors come in. A way to spot whales in action is to monitor order books. If you suddenly witness larger-than-normal buy or sell orders, there may be a whale in play. The reality is that in all financial markets there are whales that can influence the price. Also, be aware of celebrities like Lindsay Lohan, Neyo, Amanda Cerny, and Lil Yachty who participated in the campaign by bullishly tweeting about the Tron blockchain or its native TRX token. Not all are real deals in the market. But when someone asks whether a cryptocurrency will ever become the currency of choice the answer is in the art world. A recent collector paid 800 ETH for Punk 6965 which’s $1.5 million at the time of the purchase. Hence if the cryptocurrencies are traded widely and the more respectable they get, the greater the chance of them becoming a useful unit of commerce for the new digital world.
“A 3 day Vegas rule in gambling says: never put in more than you can afford to lose.
* This article represents only the opinions of the writer. Any action or investment you take upon the information from this article is strictly at your own risk. No guarantee of completeness, accuracy, timeliness. The information contained herein is not intended to be a source of validation and does not constitute investment advice. A qualified professional should be consulted prior to making financial decisions.