Investing in Cryptocurrency – How to do it right?

Investing in Cryptocurrency – How to do it right?

Cryptocurrency Market Analysis
September 12, 2017 by Hitesh Malviya
301
In the ocean of cryptocurrencies, the boat of Bitcoin and other alt coins has been sailing through all storms. Traditional investors are seeing incredible returns with every new dawn and yet many are not aware of how to evaluate these digital coins for their maximum potential.   In publicly traded companies are required to maintain balance
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In the ocean of cryptocurrencies, the boat of Bitcoin and other alt coins has been sailing through all storms. Traditional investors are seeing incredible returns with every new dawn and yet many are not aware of how to evaluate these digital coins for their maximum potential.
 
In publicly traded companies are required to maintain balance sheets. Investors can go through the health of the company’s finances in complete detail. Furthermore, even though business and industry research is still required, but it’s a major help for value hunters.

Crypto companies, on the other hand, doesn’t have balance sheets. Prices are mostly based on the promise of innovative new technologies and mainly on hype. So essentially, there is no way to understand the underlying value of these coins and the technologies/companies they represent. Fortunately, many cryptocurrency investors have found a smart way out, and it’s not very different from the way stocks are evaluated by everyday value investors. We at Itsblockchain bring to the basic steps on figuring out if a coin will make it or break it:

  1. Know the brains behind the project, the creators, and developers that are building the technology which the coin represents. For reference, solely because of the faith people place in the leadership skills of Vitalik Buterin, Ethereum’s creator has buoyed the price of Ethereum at about $300/coin, even while Ethereums consumer-facing applications of the technology are not yet commonplace. 
  2. Locate the markets which sell the coin. In the early days of the cryptocurrency, you might only be able to make a purchase at a single web exchange (Bittrex, Poloniex, etc.). Though when their popularities, they might become available through more exchanges, which would increase its trading volume and price. If you buy an undervalued coin before it becomes available in multiple exchanges, there is a great potential upside to it. Also, pay good amounts of attention to the coins bought and sold primarily in the East or West. Cryptocurrency mania tends to quickly cross oceans, adding millions of new potential buyers. 
  3. Next, your attention should be diverted to other companies and entities that are using or partnering with the coin/technology you’re interested in. Microsoft’s involvement with Ethereum is a good sign, for example. Real-world uptake due to problem-solving ability is essential and definitely increases the value of the coin. 
  4. Find out the price history of the coin. Carefully look at its inflation, volatility, and stability and try to underline the reasons behind it like does it respond to a hype cycle, then come crashing down (pump and dump)? This will increase your accuracy in anticipating future price movement. 
  5. It is absolutely imperative that you understand the technology behind any coin that catches your interest and it’s usage. Yes, cryptocurrency tech is mostly based on coding, and at times can be difficult to grasp, so that you don’t end up investing in something with a real world application that you don’t understand, even if that application won’t come into being for months or years. 
  6. Coins worth investing in will always make available a Roadmap that explains future plans, release dates, and other events of note. Achieving these goals in a timely manner tends to raise coin prices, so understand what’s coming up and try to invest before big events launch. 

While you do all of this, it is important that you also devote time to discussions on crypto forums like Reddit and Bitcoin Talk because of this is where people with a very broad horizon of knowledge and experiences explain the technicalities and their vision of the coin.

See, at the end of the day, there is no way to predict which coin will make it or break it. Investing in crypto currencies is surely risky, but you can keep this risk at bay by doing your research properly.

Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.

2 Comments

  • Fasih Sandhu

    There is another option emerging for investors and that is to invest in cryptocurrencies through Investment Funds and/or ICOs regulated by Securities regulators. For instance, on September 6, British Columbia Securities Commission in Canada announced the first registration of an investment fund manager, First Block Capital, solely dedicated to cryptocurrency investments – a landmark in the global crypto capital markets. Prior to it, on August 17, the Autorité des marchés financiers in Quebec, Canada also approved the public sale of a new digital currency, #MKP (aka Impak Coin), issued by Impak Finance. This is the 1st of its kind decision in the Canadian Securities Markets as it has set a precedent for other startups and international regulators on how to embrace the alternative investment products such as ICOs and ITOs. More on it at https://www.linkedin.com/pulse/icos-itos-crypto-investment-funds-canadian-limelight-fasih-sandhu/

  • Thanks for helping me learn more about investing in cryptocurrency. I’m glad that you mentioned that you should learn more about the technology that’s used for a coin. As far as I know, this seems like a great idea to make sure that you can make an informative decision in the future, and that you know what to expect. That being said, I’m kind of interested to learn more about some good things to look for, especially if that knowledge can be beneficial to making a decision.

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