MEDIUM RISK INVESTMENTS

Up until late 2016 Bitcoin was the cryptocurrency, and there was not much besides it. If you wanted to invest in the success of cryptocurrencies, you bought Bitcoin. Period. Other cryptocurrencies – called “Altcoins” – have just been penny stocks on shady online-markets, mostly used to keep miner’s GPUs working, pump the price and dump the coins.

However, this has changed. While Bitcoin is still the dominant cryptocurrency, in 2017 it’s a share of the whole crypto-market rapidly fell from 90 to around 40 percent, and it sits around 50% as of September 2018.

There are several reasons for that. While Bitcoin remains the undisputed king of cryptocurrencies, many people have questioned its future utility. Firstly, there were new and exciting cryptocurrencies coming out secondly, Bitcoin was suffering from severe performance issues and it looked like the Bitcoin community were nowhere near to solving this problem. The block-size issue, in particular, was a huge bone of contention in the community, which ultimately led to the creation of bitcoin cash and the splitting up of the community.

So, the question is, what coins can you potentially invest in?

forex
forex trade long

Up until late 2016 Bitcoin was the cryptocurrency, and there was not much besides it. If you wanted to invest in the success of cryptocurrencies, you bought Bitcoin. Period. Other cryptocurrencies – called “Altcoins” – have just been penny stocks on shady online-markets, mostly used to keep miner’s GPUs working, pump the price and dump the coins.

However, this has changed. While Bitcoin is still the dominant cryptocurrency, in 2017 it’s a share of the whole crypto-market rapidly fell from 90 to around 40 percent, and it sits around 50% as of September 2018.

There are several reasons for that. While Bitcoin remains the undisputed king of cryptocurrencies, many people have questioned its future utility. Firstly, there were new and exciting cryptocurrencies coming out secondly, Bitcoin was suffering from severe performance issues and it looked like the Bitcoin community were nowhere near to solving this problem. The block-size issue, in particular, was a huge bone of contention in the community, which ultimately led to the creation of bitcoin cash and the splitting up of the community.

So, the question is, what coins can you potentially invest in?

Here’s an example breakdown:

How To Invest in Cryptocurrencies: The Ultimate Beginners Guide

This lists cryptocurrencies in decreasing order of marketcap. Market cap means the value of all token available. It is not a perfect metric, but likely the best we have to recognize the value of a cryptocurrency.

Think About the Utility That the Coin Is Bringing Into The System

So, you have gone through the market caps and decided on the bunch of coins that you wanted to invest in? Awesome job. However, this is where the real work begins.

The first thing that you need to do is to read whitepapers. Now, we understand that reading PDFs may not be the most exciting of things, however, you absolutely have to put in the work beforehand before you reap any sort of benefits.

Reading the whitepaper itself will give you two tremendous benefits:

Firstly, you will be more knowledgeable about the coin itself and learn about the utility that it is bringing into the ecosystem.

Secondly, a poorly written whitepaper is often a good sign of knowing whether a project is worth investing in or not. If the team itself can’t simply explain the true utility of their token, then it is probably not worth investing into.

A white paper is the bread and butter of any and all ICOs. According to Wikipedia.

“A white paper is an authoritative report or guide that informs readers concisely about a complex issue and presents the issuing body’s philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.”

In simpler terms, a white paper can tell potential investors everything they need to know about the project. This is the reason why an ICO which doesn’t have a whitepaper should simply be looked over.

A well-crafted whitepaper can define a generation. Just look at what Bitcoin’s whitepaper has done to this era. An ICO which doesn’t bother putting in any effort shouldn’t be given any attention.

Having said that, after you read a decently written whitepaper, there are some decisions that you will need to make.

Check #1: The Value that The Project is Bringing in

Keep in mind the issues that crypto world is desperately looking to solve, mainly: privacy, scalability, and interoperability. A good way to go about your investment is to find the projects which are specifically working on solving the aforementioned problems. Here are some of the projects that are looking to solve each of the three aforementioned problems:

Privacy: Monero, Zcash, Dash

Scalability: OmiseGo, Cardano

Interoperability: AION

 

Check #2: Does the Project Need Tokens?

So, how do you make sure that you are getting good quality tokens?

You inspect the project and ask yourself the following questions:

Does this project need to be on the blockchain? Does this project need to have tokens?

If the answer for any of those happens to be “No”, then those projects don’t need a token and those projects are doing an ICO simply to raise money. There is a way to find out the true utility of the token.

There are three tenets to token utility:

Role.

Features.

Purpose.

Each token role has its own set of features and purpose which are detailed in the following table:

crypto guid

Let’s examine each of the roles that a token can take up:

By taking possession of a particular token, the holder gets a certain amount of rights within the ecosystem. Eg. by having DAO coins in your possession, you could have had voting rights inside the DAO to decide which projects get funding and which don’t.
The tokens create an internal economic system within the confines of the project itself. The tokens can help the buyers and sellers trade value within the ecosystem. This helps people gain rewards upon completion of particular tasks. This creation and maintenance of individual, internal economies are one of the most important tasks of Tokens.
It can also act as a toll gateway in order for you to use certain functionalities of a particular system. Eg. in Golem, you need to have GNT (golem tokens) to gain access to the benefits of the Golem supercomputer.
The token can also enable the holders to enrich the user experience inside the confines of the particular environment. Eg. In Brave (a web browser), holders of BAT (tokens used in Brave) will get the right to enrich the customer experience by using their tokens to add advertisements or other attention-based services on the Brave platform.
It can be used as a store of value that can be used to conduct transactions both inside and outside the given ecosystem.

Helps in an equitable distribution of profits or other related financial benefits among investors in a particular project.

So, how does this all help in token utility?

If you want to maximize the amount of utility that your token can provide then you need to tick off more than one of these properties. The more properties you can tick off, the more utility and value your token brings into your ecosystem. If the role of your tokens cannot be clearly explained, or if it doesn’t really tick off more than one of the roles given above, then your token doesn’t have any utility and you can do without it.

Now, why shouldn’t you take useless tokens with little to no utility?

For that, we need to understand the concept of token velocity. Token velocity is an indication of how much people respect the value of that particular token. If people hold on to a token, then it has low velocity. However, if people quickly sell that token for BTC, ETH, or Fiat then that token has high velocity.

If you were to define Token Velocity in strictly mathematical terms, then it would look like this:

Token Velocity = Total Transactional Volume / Average Network Value.

If we were to flip the formula then:

Average Network Value = Total Transactional Volume / Token Velocity.

Now, that leads to two conclusions:

More the token velocity, the less the average network value. More the transactional volume, the more the token velocity. This is the reason why you should work for a project whose tokens actually have some utility and gives their users a reason to hold on to them.

Alright, so now that you know what kinds of coins you should invest in, we will now teach you how to look for obvious signs of scams.

Buying Bitcoin…Without Buying Them

While some years ago it was a real Odyssey to buy cryptocurrencies, today you have a full scope of options. Let’s begin with buying Bitcoin. That’s the easiest part. Some people want to invest in Bitcoin without having the trouble of storing them.

They can use investment vehicles like the XBT tracker (available on Swedish and German exchanges), the Bitcoin investment trust on Second Markets (USA), the Bitcoin ETI (Gibraltar and Germany) and some more. As Bitcoin rises, more and more brokers and exchanges try to set up a Bitcoin-based financial product.

All these investment products have in common that they enable investors to bet on Bitcoin’s price without actually buying Bitcoin. While most cryptocurrency-fans think that this takes away the whole fun and sense of it, for many people it is the easiest way to invest in Bitcoin’s success. You can use the investment channels you already are used to, and if something goes wrong, you have your certificate and someone to take to the court.

Currently, no such investment product exists which covers more cryptocurrencies. But there are some in progress, both in the USA and in Europe.

Buying Cryptocurrencies: Two Kinds of Exchanges

The exchange serves as one of the most critical functions in the crypto ecosystem. It basically acts as a portal between the Fiat world and the crypto world. There are usually two types of exchanges:

Fiat to Crypto.

Crypto to Crypto.

Fiat to Crypto

Fiat to Crypto exchanges helps you buy Cryptocurrencies in exchange for Fiat money. Coinbase is a perfect example of this kind of exchange. Coinbase helps you buy BTC, BCH, LTC, and ETH in exchange for Fiat currency.

Crypto to Crypto

Then we have the Crypto to Crypto exchanges. These exchanges help you exchange certain cryptos like BTC, ETH, BCH etc. for other cryptocurrencies. Binance is a fine example of a crypto-to-crypto exchange.

While they do offer pretty valuable services, the problem is that they are all centralized, which makes them vulnerable. This is an extremely risky proposition when you consider the sheer amount of money that these exchanges deal with each and every single day.

When it comes to buying crypto from these exchanges themselves, it is really not that complicated.

Firstly, you open up an account at the exchange

You then verify your identity – this is required due to Anti-Money-Laundering rules in most jurisdictions

Fund your account with Dollar or Euro or whatever paper money you use. On some exchanges, like Bitcoin.de, you don’t need to fund your account, but trade directly with other users.

The question, what exchange to use depends mostly on where you live. It’s always better to use an exchange physically close to you. If it is located in the same jurisdiction as you, you have the best chances to get money legally back if some bad things happen. If no exchange is located in your jurisdiction, it is better to use exchanges based in stable countries with a good legal system.

Another factor to decide which exchange you use is some coins you want to buy and your patience. If you want to acquire large sums of Bitcoins fastly, you need to use one of the major exchanges which provide enough liquidity. If you only want to buy small amounts of coins and if you are not in a hurry, you can try to buy them on small exchanges. If your order gets filled, you most likely will get better prices than on big exchanges. Check out the best crypto exchanges.

Is There A Good Time To Buy?

There is no general rule when to buy cryptocurrencies. Usually it is not a good idea to buy in at the peak of a bubble, and usually, it is also not a good idea to buy it when it is crashing. Never catch a falling knife, as the trader’s wisdom says. The best time might be when the price is stable at a relatively low level.

The art of trading is to decide when a crypto is in bubble mode and when it reached the bottom after falling. What is easy to say in retrospective is a hard question in the present, which can never be answered with absolute certainty. Sometimes a coin starts to raise, and after it passes a mark, where everybody thinks this must be the peak of a bubble, the real rally just begins.

For example, many people did not buy Bitcoin at $1,000 or Ether at $100, because it seemed to be crazily expensive. But some months later these prices appear to have been a good moment to start.

There is only two pieces of advice about timing we can give. First, don’t compare crypto bubbles with traditional financial bubbles. 10 percent up is not a bubble but can be daily volatility. 100 percent up can be a bubble, but often it is just the start of it. 1,000 percent might be a bubble usually, but there is no guarantee that it pops.

Second, take some time to watch. Don’t buy-in, because there was a dip. There might be another. And don’t buy-in, because you fear that it will explode tomorrow. Watch it, get yourself informed, buy it, when you think the timing is good. And, maybe most important: don’t be a weak hand. Don’t sell too early. Hold. The monetary revolution has just started.