Written by Jon De La Cruz of iCompareFX.com
Cryptocurrencies have come into the limelight again in the recent past. The value of bitcoin has witnessed a significant upswing that started toward the end of March 2019. From trading at under $4,000 earlier this year, it valued at close to $13,000 at the end of June. Facebook has announced the launch of its cryptocurrency, Libra. Jack Dorsey, Twitter’s CEO, is working toward incorporating different cryptocurrencies into Square, his payments business.
Glen Goodman, UK-based financial investor, author, and trading expert is of the opinion that investing in cryptocurrencies is a “once-in-a-generation” opportunity. However, he also cautions that although the rewards can be great, one needs to account for the risks involved as well. So, while investing in cryptocurrencies might help you reap healthy returns, you need to pay attention to different aspects.
Watch Out for Scams
Continued government crackdowns have resulted in a reduced number of cryptocurrency-related scams, but they still exist. Consider the great rewards offered by AriseBank in not too distant a past. Earlier this year, the bank’s founder pleaded guilty to securities fraud in a federal court. Investors were promised Federal Deposit Insurance Corporation (FDIC) insured accounts, which was never meant to be.
Investing in initial coin offerings (ICOs) requires that you exercise particular caution. No matter how big or flashy an offering might seem, determine just who is behind the project. Does the company have experience with blockchain? Does it have highly regarded advisors on board? Celebrity endorsements might serve as red flags too, because these are typically sought in the absence of real expertise.
How Much to Invest?
Cryptocurrency investments, like just about any other type, are not devoid of risk. As a result, it is crucial that you don’t invest more than you can afford to lose. If the market is going through a slump, as was the case throughout much of 2018, getting the returns you hope for might require that you stay invested for a long period. If you end up cashing on your investment when the going is slow, prepare for losses.
Diversify Your Crypto Investments
Just about every successful investor will tell you that you need to have a diversified portfolio. While over 1,600 different cryptocurrencies have been created over time, some are already defunct. Given the sheer number from which you still get to choose, narrowing down on ones that are worthy of investment requires that you carry out some research about recent trends. Some of the leading cryptocurrencies other than bitcoin include:
- Ethereum (ETH)
- Bitcoin Cash (BCH)
- Tether (USDT)
- Litecoin (LTC)
- Zcash (ZEC)
- Dash (DASH)
- Monero (XMR)
- NEO (NEO)
- Cardano (ADA)
- EOS (EOS)
- Ripple (XRP)
Bitcoin remains the largest cryptocurrency when it comes to market capitalization, followed by Ripple, Ethereum, and Tether. As a result, diverting a larger share of your crypto investments toward these cryptocurrencies provides you with a safety net of sorts.
Scores of investors have made significant gains by investing in cryptocurrencies over the last few years, and there is no reason why others cannot. With the adoption of cryptocurrencies by major institutional players, their mainstream use does not seem very distant. Do they make for good investments? The reliable ones certainly do.
About the Author
Jon works as a researcher with iCompareFX, an online platform that gives users easy means to compare the world’s top overseas money transfer companies. Outside of work, Jon is often found cycling around town.