Cryptocurrencies are going in all rage creating new milestones of growth in recent years. The Bitcoin reached record values of over $19,000 USD, and there are several other currencies that are closely following this huge growth story. From financial firms, banks, institutional and individual investors to mainstream media, all are taking a keen interest in cryptocurrencies.
But given the huge growth story of Bitcoin and a few other cryptocurrencies, the promise is not equal for all digital currencies that are being unleashed in the market now. There are too many of them trying to get a share of the million dollar market pie. This is why investors need to be cautious and diligent in their choices. You can only take risks that look feasible and balanced with opportunities on the other side. You need to be up to date with cryptocurrency prices and news before investing in digital currencies.
Let us share some expert advice that every new investor should mind before investing in these emerging cryptocurrencies.
1. How Does It Work?
The encryption technology and addressing its loopholes work at the core of any cryptocurrency. Any digital currency primarily works to encrypt the transaction to protect it from fraudulent activities. As each transaction is inherently different, the encryption ensured facilitates protection through authentication and public key transmitted between the buyer and seller.
Thanks to Blockchain which makes deletion and tampering of any transaction data impossible, you no longer need to safeguard the encryption key. Blockchain powering most cryptocurrencies allows accessing transactions at a faster pace just doesn’t allow any compromise on security as one cannot tweak with the transaction data.
Here are some of the key aspects of cryptocurrencies:
- Storage: A cryptocurrency wallet stores the purchased coins. These wallet apps are protected by distributed ledger system of Bitcoin allowing easy access while preventing frauds.
- Paper Trail: All transactions are registered in a Blockchain based distributed public ledger.
- Anonymity: Transactions remain completely anonymous.
- Regulation: Thanks to decentralized nature of the cryptocurrency the transactions require no regulatory measures. The transactions remain secured and fool-proof while allowing throughout automation and ease of access.
2. Give utmost priority to research
While there is promise galore with cryptocurrencies, you need to do thorough research to decide which currency to invest your money. Here is the checklist to guide you researching the credible cryptocurrency options for investment.
- Does the cryptocurrency enjoy the support of a technically expert team?
- Can you see the code base of the currency? In case it is possible, review the code base and verify the source code.
- Does the currency offer a solution to a real problem in a unique way or just offers another digital currency that looks similar to the existing ones?
- Does the cryptocurrency offer a proof of concept or a beta version for the investors to evaluate its chances in the long run?
3. Focus on the long-term gain
If you look at the quick growth experienced by Bitcoin and a few other cryptocurrencies initially, this happened due to lack of competition and the first burst of enthusiasm with this promising financial technology. This is something you cannot expect to happen every other day. Now, the cryptocurrency market is tremendously populated and well contested with new players entering frequently. Naturally, grabbing any cryptocurrency investment as “get rich quick scheme” would be a serious blunder. You need to focus on long-term gains rather than short time bets.
Focus on investing in crypto coins that have the potential to derive huge value over a period of time. This is only possible if the currency looks promising with its unique offering in terms of both technology, network quality and most importantly, real-life solutions to transactions. An innovative niche solution is bound to win and get you good returns if you have the patience to hold on to it.
4. Diversify the investment portfolio
Like any investment decision that tries to maintain a balance between risk factors, market volatility and opportunities, the investment in cryptocurrencies should also ensure diversification of portfolio to register growth. With more than 1,600 different coins and tokens in the market of cryptocurrencies, you never go short of options to diversify your investment.
Both Bitcoin (BTC) and Ether (ETH) are the two most valuable cryptocurrency up in the ladder that can give you stability even though they cannot promise a quick growth as they already reached almost an optimum value. But when it comes to securing long-term gain and stability, you need to pick up these two premium choices.
Now, for choosing among new entrants with possibilities and potential for growth you need to choose ones that solve real-world problems with the fundamentals right. If a coin is introduced with a unique way of making transactions easier and looks promising to achieve growth, you can harbour a part of your investment for it. But refrain from investing in cryptocurrencies that look similar and does not have any new value proposition.
5. Always have a realistic goal
Cryptocurrencies had its heyday when within a span of two years or less leading coins like Bitcoin and Ether achieved thousands times growth. While this can happen again, with so many contestant coins and tokens out there, it is becoming increasingly less probable to happen. So, while targeting growth and return it would be wise to remain on the realistic side.
Let us explain here briefly some key aspects of cryptocurrency investment that you should keep in mind:
- First of all, you need to make your investment balanced by diversifying your portfolio across coins for stability, long term gain and faster growth opportunities.
- To safeguard your investment from losing on craps always put your money on blue-chip cryptocurrencies like such as Bitcoin, Ether, Stellar, LTC , etc. These currencies will give your investment solid stability, long term growth and confidence.
- ICOs or newly launched cryptocurrencies can equally present sound quick-gain opportunities and high level of risks. Naturally, you need to be very observant and depend on extensive research to invest in them. When investing in ICOs only put a small part of your investment sum for them.
- Initially, you can encash your gains from less known currencies and hold premium ones for long-term gain. That is one impressive way to subvert risks.
Remember, cryptocurrencies represent a new frontier of wealth that needs continuous study and research to know about the opportunities unfolding in a tremendously competitive market. You must need to be aware of cryptocurrency market news.