In the last couple of years, cryptocurrencies have undoubtedly become the hot topic of discussion. There have been numerous stories about people becoming overnight millionaires through cryptocurrencies. Similarly, there have also been stories of people who lost hundreds of thousands of dollars just because they wanted to make a quick buck. Are you looking to invest in crypto in a safe manner? If you are, you need to properly educate yourself about what to do and how to do so you don’t lose your hard-earned money. This crypto finance guide can help you do exactly that. Neuercapital is here to explain you in detail.
How to Invest in Crypto?
The exchangeable and immutable cryptographic tokens have the potential of becoming non-manipulative and hard money for the entire world. It is believed that a time would come when Bitcoin and other cryptocurrencies will end up replacing the Dollar, Euro and others to create the first and free hard world currency. Investing in cryptocurrency is a good decision if you are trying to hedge your net-worth against the fall of the dollar, whenever it happens. Others want to put their money in cryptocurrency because they truly support what it is; a hard and free currency for the world. Also, those who like the technology behind it are also tempted to invest in different cryptocurrencies. However, you shouldn’t think about crypto finance just because of the hype surrounding this digital currency. FOMO (fear of missing out) does push people to purchase cryptocurrencies because they also want to make money like the rest, but you need to understand them before you invest. Since early-stage investors of Bitcoin and Ethereumwere able to earn millions of dollars in profits, many people have chosen to jump on the crypto bandwagon. But, as more and more people flooded the market to get a slice of crypto pie, the inevitable happened. The market nosedived. When Bitcoin dipped, so did other currencies, which caused a lot of people to lose their entire savings.
So, how should you invest in crypto without falling into the same holes? There are some things that you need to do:
Accept that you have to take calculated risks
As cryptocurrencies are more volatile than any other asset in the market, they cannot be considered a normal investment. In addition, there is always a risk that crypto trading might be outlawed in your country. Therefore, it is always best to invest only as much money that you can afford to lose.
Remember that there are other coins
Up until 2016, the only cryptocurrency that was in the market was Bitcoin. If you wanted to tap into the benefits of cryptocurrency, the only option you had was buying Bitcoin. The other cryptocurrencies referred to as Altcoins were just penny stocks found on shady online markets. Their purpose was to mostly to keep the GPU of the miner working, increase the price and then dump the coins. But, things have now changed. Even though Bitcoin still remains the most dominant cryptocurrency, its share of the overall market fell in 2017 from 90 percent to 40 percent. It is still the undisputed king in the crypto market, but many people are questioning its future utility. New and exciting cryptocurrencies are being introduced. Plus, Bitcoin was also suffering from severe performance issues and it looked that the Bitcoin community couldn’t figure out how to solve the problem. However, the biggest issue was the bone of contention within the community itself, which ultimately led to the introduction of Bitcoin Cash. So, which cryptocurrency should you invest in? You can check the market cap, which is the value of the token. While it may not be the perfect metric, it is perhaps the best way of recognizing the value of a cryptocurrency.
Consider the utility the coin is bringing into the system
Have you decided what coins you will invest in? Now, your real work begins. It is time for you to start reading the whitepapers of the coins you want to get. Yes, reading PDFs is not exactly something exciting, but you need to do your due diligence if you want to reap the benefits. Reading their whitepapers makes you more knowledgeable about the coin you want to invest in and you can also discover that utility it is bringing into the eco system. Furthermore, if a whitepaper is poorly written, it tells you whether the project is worth investing in it or not. When the coin’s team cannot define the true utility of their token, it is best to avoid it altogether. A whitepaper can provide potential investors with all the information they could possibly need. Thus, any ICO that doesn’t have a whitepaper should be completely overlooked. Bitcoin’s whitepaper is an excellent example of what a whitepaper should be like. If no attention has been paid to the whitepaper, the ICO isn’t worth looking into. Once you have read the whitepaper, there are certain decisions you will have to make. What are they? Let’s check them out:
The value the project can bring
You need to check whether the project is bringing any utility into the ecosystem. Ethereum is an excellent example of this scenario. It took off in the market so fast because of the sheer amount of value it was bringing into the ecosystem. It was the first platform that could be used by developers all over the world for building their dapps on the blockchain. Apart from that, you should also bear in mind the issues that the crypto industry is looking to solve, such as scalability, privacy and interoperability. When you are searching for an investment, a good way is to consider those that are trying to solve these problems. For privacy, you can consider Dash, Zcash and Monero. AION is good for interoperability while Cardano and OmiseGo work for scalability.
Does it need any tokens?
How can you make sure you are getting good quality tokens? You can go over the project and ask whether it needs any tokens or does it need to be on the blockchain. If the answer is no, then they are only doing an ICO to raise money. In order to determine the utility of a token, you need to consider its roles, features and purpose.
How to Spot Scams?
Good coins have an active development team, a transparent and clear vision and an enthusiastic and vivid community. Bad coins, on the other hand, are transparent, have a community that’s mostly all about making money to get rich quick and promote vague technical advantages without explaining how to reach them. If you want to identify a crypto scam, there are some things you need to check and they are:
It goes without saying that the credibility of a coin’s team has a direct impact on its success. Think of it this way; when you are putting your money into a company, wouldn’t you want to know that it is in good hands and that your money will significantly appreciated? OmiseGOis a great example of a successful project. Their team is undoubtedly incredible and their advisors include Lightning Network Creator Joseph Poon and also VitalikButerin. To check whether a team can be considered reliable or not, there are certain things you can check. Find the name of the team members and learn as much about them as possible. Have they been part of any successful ICO venture before? Have they been part of a reputable company? Are they endorsed or recommended by well-known people? You should also check the images of the team members to ensure you are not being ‘catfished’. Also, most people use the same picture on multiple websites so this will give you an idea of what else they are involved in.
Pyramid Scheme Resemblance
It should be noted that any ICO promising you ‘guaranteed returns’ on your investment is nothing less than a scam. Any good crypto investor will tell you that it is not possible to guarantee anything in the crypto world. As mentioned earlier, it is one of the most volatile markets in the world and it is not possible to guarantee anything. Any coin that’s doing so is a total scam.
Inactive GitHub Repository
To assess how seriously development is ongoing in the project, you should look for an active GitHub repository. An inactive one means that the team is not taking the project too seriously and you should steer clear of them. Buying Cryptocurrencies: The Types of Exchanges One of the most critical roles in the crypto system is played by the exchange. Put simply, it is a portal between the crypto world and the Fiat world. You will come across two types of exchanges; fiat to crypto and crypto to crypto. Let’s take a look at them:
Fiat to Crypto
As the name indicates, these exchanges enable you to buy cryptocurrency in exchange for fiat money. A great example of this kind of exchange is Coinbase. You can use this exchange to buy BTC, LTC, ETH and BCH in exchange for fiat currency.
Crypto to Crypto
As obvious from the name, in these exchanges, you can exchange one kind of crypto for another. Certain cryptocurrencies like BTC, BCH and ETH can be exchanged to get any other cryptocurrency. A good example of this kind of exchange is Binance. While these exchanges do offer very valuable services, their biggest issue is that they are centralized. This makes them quite vulnerable. It is extremely risky, especially when you consider the sheer amount of money that’s dealt with by these exchanges on a day to day basis. As far as making a purchase from these exchanges is concerned, it is really not that difficult. The first thing you have to do is open an account at the exchange. Next, you have to give verifications for your identity under the Anti-Money Laundering rules in most areas. Then, you need to fund your account with whatever paper money you use, whether it is dollar or Euro. There are some exchanges that don’t require you to fund your account and just allow you to directly trade with others. When it comes to choosing an exchange, it will mostly depend on your location. It is a good idea to opt for an exchange that’s physically close to your location. If it is in the same jurisdiction as yours, there is a good chance that you will legally be able to get your money in case something goes wrong. If there are no exchanges in your jurisdiction, you should choose an exchange that’s based in a stable country and has a good legal system. Another important factor that should be considered when choosing an exchange is the quantity of coins you wish to buy and how patient you are. If you want to acquire huge number of Bitcoins quickly, you will need to sign up with one of the major exchanges that offer enough liquidity. If you just wish to purchase a small quantity of coins and you are not in a hurry, then you can get them on small exchanges. These will give you a much better price than big exchanges.
Is There an Ideal Time to Purchase Crypto?
There is no rule of thumb when it comes to purchasing cryptocurrencies. The only thing to remember is that you should avoid buying at the peak of a coin and when it is crashing. You shouldn’t try to catch a failing knife. The best time to make a purchase is when the price is stable and relatively low. The real art of trading is figuring out when a crypto has hit rock bottom and is falling and when it is in bubble mode. You cannot answer this with absolute certainty. You should remember that traditional financial bubbles and crypto bubbles shouldn’t be compared. Also, it is best to take some time and watch the cryptocurrency before you buy it. Keep an eye on it for some time, learn as much as you can and then make your purchase.
How to Store Cryptocurrencies
Once you have purchased the cryptocurrencies you wanted, your next concern should be storing them. Never leave them on the exchanges because they will be vulnerable. Luckily, there is no shortage of storage options for you to explore. There are hot wallets and cold wallets/storage. You can also choose between paper wallets and hardware wallets, depending on what you are comfortable with. This crypto finance guide can come in handy for allowing you to invest your money in the cryptocurrency market in the right way in order to make the most of it.