Crypto Investing Simplified
Cryptocurrencies have become the new rage in town with each day posting new all time highs.
The total market of cryptocurrencies has grown by 3000% this year to reach a number of more than $500 Billion which is greater than the market cap of 490 of the Fortune 500 companies.
Naturally, people want to jump on the train as FOMO (Fear Of Missing Out) kicks in and people hear stories of their friends getting rich.
The hype around cryptocurrencies is clearly indicated by exponential increase in new sign-ups on exchanges like Coinbase. This new rush has managed to move Coinbase’s app to number one position on app store
& unofficial app of myetherwallet (a widely used ethereum wallet) to #3 position.
After hearing about these exciting stats, an obvious question arises:
“How to Invest In CryptoCurrencies?”
The answer is exchanges:
Usually the charge transaction commissions for their services or simply charge fees as a matching platform.
Some of the most commonly used cryptocurrency exchanges are:
A comprehensive list of all major exchanges can be found here: Crypto Exchanges List
Now, the next question that someone has in their mind after visiting these exchange sites is :
“What cryptocurrencies should I invest in?”
The cryptocurrency market is predominantly dominated by Bitcoin which occupies roughly 50% market share (Source).
This domination is evident from the fact that Bitcoin was the second most searched term in Global News category according to Google Trends.
With time, people have started to realise that Bitcoin is not the best cryptocurrency that exists for all use-cases and this has led to fruition of many cryptocurrency ecosystems that solve specific problems.
Cryptos solving privacy & anonymity issues include: Zcash, Monero, PIVx etc.
Cryptos which power smart contract ecosystems include Ethereum, Neo, EOS, Rootstack.
At the time of writing of this article, there exists more than 1000 active cryptocurrencies and a plethora of them getting created each day raising funds through ICOs.
This means identifying good crypto projects is an herculean task & this has led to opening of crypto hedge/index funds left & right.
This identification process is important because one should maintain a diverse portfolio of cryptocurrencies in his portfolio to lower the risks associated with these volatile and news driven markets.
Some of the important things to consider when investing in an ICO or cryptocurrency are:
- Team, advisors and their past work experiences
- How developed is the product/prototype
- How much amount is the team raising and do they need that much of money to build the product (For ICOs).
- Tokenomics — How are the tokens/coins distributed among the team, product, public, marketing: A good project would usually have the following order of distribution : Public>Product>Marketing>Team
For example, the ICO price of Ethereum was $0.3 & the current trading price is $800. That represents a whopping 25000% increase in price, returns like these in such a short span of time (~2 years) are possible only in the crypto world.
Before you go all-in investing in cryptos on reading such statistics, it is important to note that majority of the crypto markets are unregulated.
This has led to lot of scammy and pump & dump projects surfacing in the market. These include projects that don’t go further than the whitepaper development, projects whose coins are pumped to an insignificantly high price usually by founding team members and subsequently dumped (Eg- Wolf Of Wall Street) causing prices to collapse.
It is only in the crypto market that clear ponzi schemes like BitConnect can exist and be among the top 20 cryptocurrencies.
Hopefully, as governments wrap their heads around cryptocurrencies and understand their implications, cryptocurrency investing will become safer with time with clear laws and taxation policies being put in place.
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