Alexander Borodich, CEO of Universa.io and “business angel of year 2016,” shares a few tips on investing in Bitcoin and other cryptocurrencies for 2018.
[Editor’s note: This article was submitted by guest author: Alexander Borodich, CEO Universa.io, venture investor, and Forbes contributor who also has a Ph.D. in mathematics and electronics.]
Cryptocurrencies, as decentralized systems of electronic cash, drastically changed our approach to payment instruments, saving investments, and attracting capital. We have seen how the Bitcoin price has risen by more than 1,000 percent – from $1,000 in early 2017 to $20,000 by mid-December of the same year. This rapid growth prompted people to invest their money in Bitcoin. To date, both hedge funds and novice investors, succumbing to excitement, are trying to get their share of the huge profits.
With all this in mind, is Bitcoin a good investment option in 2018? Here are 4 things to look out for when investing in cryptocurrencies.
1. Market Outlook
At the moment, there is more foam around the evaluation of Bitcoin price than you have in a cup of morning coffee. World economists argue that this phenomenon has no equal among any previous soap bubbles. Certainly, Bitcoin for some period eclipsed even the dot-com bubble in 2000. This is the unanimous assertion of all market experts, who are falling into hysterics about the impending threat of the financial end of the world. However, industry players continue to see natural coffee without any foam. Thanks to the market value of the main cryptocurrencies, for which even the sky is not the limit, this industry has become a new category of investment for the Y generation.
On the other hand, it’s important to be aware of: Security.
Data security is one of the most serious problems of the cryptocurrencies. In recent years, we have seen hacker attacks on exchanges, which resulted in the loss of digital assets worth millions of dollars.
The users who kept their coins on these exchanges lost almost everything. Therefore, no precautions are superfluous when it comes to buying, selling, and storing your coins.
I’d recommend using a cold wallet, which allows you to control your private keys. It permits the safe access of your coins in the Blockchain. The best way to store keys in a safe place is to store them offline.
Markets are unstable and technologies are still poorly tested. Nevertheless, this is – one way or another – a great opportunity for anyone interested in investing.
2. Development of Blockchain Technologies
Blockchain allows for use of its own technology and develops completely new business models. This way has already changed the method of increasing start-ups’ worth. A huge number of platforms admit companies to create independent Blockchain apps quickly and free of charge.
On the other hand, it’s vital to keep in mind: Technical difficulties.
When it comes to investing in Cryptocurrencies, it is quite difficult to understand that the whole cryptocurrencies story is purely digital. Given that this is an electronic asset, it can often face technical difficulties. With a high level of market and exchange congestion, the buying, selling, and exchanging processes slow down significantly. In the period of network congestion, the functions of crediting and withdrawing funds for certain tokens are often unavailable. If this happens and you need to sell or transfer coins, you are completely in under the power of one or another exchange.
3. Opening the Cryptoway
For investors, cryptocurrencies might be an investment opportunity of a lifetime. Traditionally, the monopoly on investment in the best global technical talents belonged to venture capital funds and private angel investors. Cryptocurrency has become a gateway, which opened the way for all who wish to invest in advanced world technologies and teams.
On the other hand, you may to keep in mind: Inexperienced teams.
Each cryptocurrency is a start-up, which creates a product to solve a particular problem. Cryptocurrency is a relatively new phenomenon too. There are a lot of teams that do not have experience in this area, as well as there are few people with extensive knowledge on the subject. Similarly to any start-up, in the absence of a proper management system, the entire project risks failure, although most projects provide information about their team.
4. Participation in the Blockchain Community
Daily communication via groups in Telegram is quite popular among the communities organized by Blockchain investors. Huge investments in start-up technology companies can be synchronized in a matter of minutes, while this process took months for traditional venture ones. The Blockchain community produces a powerful sense of purpose for all participants, united by the task of promoting Blockchain technology and making it really global.
On the other hand, it’s important to beware of: Crazy community.
And indeed it is. For example, Crypto Exchange Coinbase, by court decision, transferred the US Internal Revenue Service data of 13,000 users in order to perform tax audit. Lawmakers are really tightening the screws at regular intervals, but many early cryptocurrency adepts show signs of natural paranoia. They believe that the government spies all day and night on our life and on the movement of our money.
The whole phenomenon of Blockchain provided the fodder for endless discussions on such websites as CNBC and CNN. The Blockchain technologies are shrouded in conspiracy theories. This is partly due to the fact that the identity of the Bitcoin founder Satoshi Nakamoto still remains a mystery.
If you are investing in a startup, your money will be stuck there for years. You will have to stumble in one place until either someone or the company itself buys your shareholding, or the company goes public. Investing in cryptocurrencies is quite different, where your investments are relatively liquid. Cryptocurrencies let you buy and sell in real time.
Exchanges work around the clock and without days off. The very purchase or sale takes place instantly, which allows you to respond on market fluctuations quickly. However, the most important thing is: You need to weigh the risks already mentioned by Ethereum founder, Vitalik Buterin, before investing in cryptocurrencies. It may fall to near-zero at any time. Do your own research and never invest more than you are ready to lose.
Care to share your own tips for investing in the current volatile market? Let us know below!
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