Investing

Investing in Blockchain Assets

With the advent of decentralized exchanges such as NXT, Uniswap and trading brokers such as ETFinance, many new investments have become available, offering the potential for huge gains for the sophisticated investor. Unfortunately, though, with the potential for great returns you will inevitably have great risk. These assets are, by no means, exempt.

So, how do you determine which investments to commit your hard-earned money to? Below are some suggestions to consider when deciding how to invest:

  1. You Can Verify the Real Identity of the Asset’s Creator

The Cryptocurrency industry is rife with potential investments offered by anonymous parties. While sometimes you can get lucky and make money from these investments, more than likely you will end up in the red. You need to keep in mind that the VAST majority of crypto investments not only lose money for initial investors but can even end up completely worthless. Without the accountability of having their good name on the line, asset creators have little incentive to both protect investors from loss and have every incentive to outright scam investors in many, completely untraceable ways.

  1. The secondary, and then primary, way of spending money on the internet.

Bitcoin will slowly gain traction as a valid way to spend money across the internet. There are two chiefs’ reasons for this: one economical and the other psychological. First, in keeping with the main focus of the site, let’s go with the economic reason.

Simply, Bitcoin is a cheap way to transfer money across the web. As businesses continue to pop up across the web that allow consumers to buy bitcoin nearly instantaneously, these consumers will find it a more and more attractive option to capture the price discounts that businesses will increasingly offer as it becomes easier and cheaper to accept it. If things can be done cheaper, even if it requires the toppling of industry giants, it will be.

While it is possible, and in fact increasingly probable, that Bitcoin popularity will hit a point in the relatively-near future where it sees an explosion of growth and usage among the general population, it is unlikely that the now-popular methods of transferring money across the internet, such as credit cards and services such as PayPal or Square, will fade away as quickly as some of the more – optimistic supporters believe.

Eventually, Bitcoin will overtake the contemporary systems of sending money. The companies that offer these services, fearing their future irrelevance, will find ways to implement the protocol under their own products – in a way that end-user may very well be unaware of.

In lieu of traditional transactions, off chain transactions will prove to be a way for more and more users to instantaneously confirm transfers as they are offered as a service through trusted third-parties at substantially less than even the current average transaction fee. Eventually, everyone will have easy access.  This will lead to widened application possibilities for Bitcoin and make it a much more practical way to send money online.

  1. Look For Lasting Value

Decentralized assets are, in many ways, very similar to penny stocks (you can trade them with a reputable broker – ETFinance); they have very low liquidity and can fluctuate wildly in value. For this reason, it is important to pick only investments which can provide definite value. One way to do this is through dividend payouts.

The other is from investments that will provide long-term, growing value at a cheap price. Eventually, the market should correct to a fair price and you will make a profit. This is called value investing, an investment strategy that has been used to build some of the largest fortunes in the world today.

  1. Minimize Risk by Diversifying

Lastly, it is important to diversify into several investments. That way, you can minimize your risk of loss from a single bad choice. This is especially important in the world of crypto, where investments can become completely worthless overnight.

  1. The price move was not connected to any major event involving Bitcoin.

While there has been some talk over whether or not BTC’s price slump may be related to New York’s Bitlicense. While this still-unfolding regulation is definitely something to keep an eye on, the details of the Bitlicense were released over a month ago. Any Bitcoin dumps in relation to it would probably have already happened.

  1. The Bitcoin market is still fairly illiquid.

This means that, if any large Bitcoin holder sells for any reason, they could single-handedly crash the market by +10%.

  1. Bitcoin may have even stronger prospects than ever for the future.

Merchant acceptance of Bitcoin is consistently growing.  As more merchants accept Bitcoin and other cryptocurrencies, it will make more sense for everyday consumers to own and use them in place of credit cards and other high fee payment systems. In what would be a huge boon to Bitcoin, eBay may be in the process of implementing it as a payment option on its site.

By following these basic rules, you can significantly increase your chances of profitable crypto trading.

A post by Kidal D. (4276 Posts)

Kidal D. is author at LeraBlog. The author's views are entirely their own and may not reflect the views and opinions of LeraBlog staff.

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