Even though 2018 has been somewhat of a herky-jerky year for the alt-asset market, there is no denying that cryptocurrencies are still some of the most lucrative investment avenues available to investors today. However, before you decide to pump in big money into a particular project, there are some crucial things you need to consider regarding your investment.
So without any further ado, let's get started:
This is one aspect of the crypto domain that everybody seems to be aware of. Owing to the immense volatility that exists within this space, if you are not smart with your investments, you could potentially end up losing all of you hard earned savings overnight.
To further elaborate on this point, we can see that as per the MVIS CryptoCompare Index, the total market cap of the cryptosphere has reduced by a whopping 80% since January 2018. Not only that, when looking at Bitcoin alone, we can see that the premier digital asset has dropped from a monumental price point of $20,000 USD (January 2018) to $6,400 USD (approx)— thus showcasing a loss of 68% in its intrinsic value.
One of the USPs of Bitcoin that helped the currency garner mainstream traction upon its inception was its decentralized nature. However, over the years, many government agencies have created regulatory frameworks that have really affected the overall usability of such an amazing asset class. As a result of this, many investors have stayed away from digital currencies due to fears of its taxation status, trading rules etc.
Unlike conventional financial institutions that offer their customers with a certain degree of insurance, virtual currencies offer no such benefits. To elaborate further on this point, we can see that it is quite normal for people to get a refund on their credit cards if there is a security breach. However, such is not the case if something goes wrong with your digital wallet or crypto exchange.
Another core factor that can really affect the day to day workings of the crypto sector is ‘market manipulation’. Although many of the factors influencing the daily price swings cannot directly be attributed to investor manipulation, it is a well known fact that certain lobby groups (ahem ahem Wall Street Bankers) have indulged in such unethical activities over the years. As a direct result of this, the US SEC has time and again rejected a host of Bitcoin ETF proposals that have been submitted to it.
Not only that, many of us have also seen the prices of various altcoins rise drastically and then fall with an equal force. Such scenarios too are a consequence of market manipulation.
An extremely unfortunate but pertinent reality of the crypto sector is the number of scams that have plagued it over the last couple of years. To put things into perspective, nefarious agents have been looting unsuspecting investors since Bitcoin first came into the spotlight back in 2014. Statistically speaking, a total of $2 Billion USD was lost by investors to various ICO scams and exit schemes in the second quarter of 2018 alone.
Even though the crypto sector is largely digitized, there is still some space for human error. For example, except for a few exchanges such as Binance, Independent Reserve, most of the other trading platforms in existence today are quite hard to navigate and can leave first-time users with a bad overall experience.
Not only that, many investors have also made the common mistake of sending digital assets to wrong addresses as well as resetting their wallet passcodes (thus losing their earnings in an instant).
The point of this article was to briefly elucidate some of the core areas that many investors tend to overlook before investing big in crypto. So the next time you decide to hand in your hard-earned money to some crypto scheme/project, make sure to remember the points that have been discussed in this article.
So until next time, act smart, earn more!!
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