The whole truth about crypto-currencies. Is it worth it to invest

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9 Reasons Investing in Cryptocurrencies Is a Bad Idea

Despite jaw-dropping returns, virtual currencies are rife with risk.

Even though blazing-hot industries like artificial intelligence, cloud computing, and legal marijuana have garnered plenty of attention from investors and Wall Street alike, no asset class has been able to hold a candle to cryptocurrencies since the beginning of 2020. After starting 2020 with a combined market value of $17.7 billion, the aggregate market cap of all digital currencies soared nearly $600 billion to end the year higher by more than 3,300%. It’s very likely the greatest single year for any asset class in history.

Leading that charge has been bitcoin, the world’s largest virtual currency by market cap, and the rise of blockchain technology, blockchain being the digital, distributed, and decentralized ledger that underlies most cryptocurrencies and is responsible for recording and processing transactions without the need for a financial intermediary, like a bank. Blockchain offers numerous currency- and non-currency-related advantages over existing networks, and it’s widely believed to be a game-changer for the financial services industry.

Image source: Getty Images.

Here’s why avoiding cryptocurrencies might be a smart move

Yet, for as incredible as cryptocurrencies have been, they come with an ever-growing list of risks and concerns. At the end of the day, investing in cryptocurrencies simply may not be worth the headaches they bring to the table. Here are nine reasons investing in cryptocurrencies might be a bad idea.

1. Traditional fundamental metrics are nonexistent

To begin with, cryptocurrencies lack the usual fundamental metrics investors would look for when attempting to assign an appropriate value to an asset. With a stock, investors can pore through balance sheets, income statements, earnings reports, and management commentary, among other data and information, to assess whether a publicly traded company is believed to be heading higher or lower.

However, with cryptocurrencies, there are no fundamental metrics that can be used by investors. With the exceptions of processing speed and daily average transactions, which tell us virtually nothing about the staying power of a digital currency, there are no data points for virtual currency investors to use when analyzing cryptocurrencies.

Image source: Getty Images.

2. You’re buying the wrong asset

Another issue is that when investors buy digital tokens, they’re really buying into an asset that has no long-term value. The proprietary blockchain technology being developed by these individual cryptocurrencies is where the real value lies. Yet, buying into virtual tokens — even those tethered to a blockchain network — doesn’t give the investor any ownership in the underlying blockchain. Put plainly, the increased adoption of a digital token doesn’t mean anything for the long-term value of a cryptocurrency.

3. Blockchain is years away from being relevant

Though blockchain might be all the buzz at the moment, it’s also suffering from the proof-of-concept conundrum. During numerous small-scale projects and demos, blockchain has performed well. But no big businesses have been willing to take the training wheels off of blockchain, so to speak, to see if it can scale to millions or billions of people. The proof-of-concept conundrum describes this unwillingness to implement blockchain on a broad scale because it’s untested, as well as the need for businesses to implement the technology so it can prove its ability to scale.

It’s quite the Catch-22, and it’s likely to keep blockchain from being a disruptive technology for many years to come.

Image source: Getty Images.

4. Trading is dominated by emotional investors

Nearly all cryptocurrency investing occurs on decentralized exchanges, which institutional investors traditionally want no part of. With that being said, retail investors have predominantly been the driving force behind virtual currency trading. The danger of turning the reins over to retail investors is that they tend to allow their emotions to get the best of them, relative to Wall Street professionals. This results in cryptocurrencies regularly shooting up and down by double-digit percentages, leading to nauseating volatility.

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5. The SEC can’t help you

Next, the Securities and Exchange Commission (SEC) has flat-out warned investors that its hands are tied, and there’s little that it can do should fraud occur. A December 2020 statement from SEC Chairman Jay Clayton notes that decentralized exchanges and trading can often exist and occur outside the confines of the U.S. borders. And, since a number of digital currency transactions are designed to be anonymous, recovering your investment may not be possible.

Image source: Getty Images.

6. Security can be hit-and-miss

Speaking of fraud, cryptocurrency thefts do occur from time to time, even though blockchain is supposed to be a more secure means of transmitting and storing money. In January, the biggest crypto theft in history (at the time of the theft) was reported by Japanese cryptocurrency exchange Coincheck. All told, cybercriminals absconded with 523 million NEM coins (known as XEM), worth $534 million at the time.

Also, between 2020 and 2020, hackers slowly bled bitcoin from Mt. Gox, which at the time was handling 70% of all bitcoin trading volume. The roughly 850,000 bitcoin that hackers stole would be worth around $7 billion at today’s bitcoin price. If your coins are stolen, there may be little recourse to get them back.

7. Regulation is a double-edged sword

The previous two risks get at the point that tighter regulation is needed. Unfortunately, regulation is a double-edged sword. While tighter regulations would likely reduce instances of fraud, and it may encourage participation from Wall Street, which could improve liquidity and possibly reduce volatility, it would also remove the anonymity that diehard crypto investors have thrived on. As much as regulation is needed, it’s feared within the crypto community, and any changes to that end could lead to wild volatility in virtual token prices.

Image source: Getty Images.

8. Taxes are a nightmare

One area where regulation has picked up is with regard to cryptocurrency capital gains taxes. To put things plainly, cryptocurrency taxation is an absolute pain in the butt! With the passage of the Tax Cuts and Jobs Act in December, the like-kind exchange loophole that digital currency investors had used to avoid taxation is no more. This means all crypto sales need to be reported as a capital gain or loss — and this includes when you dispose of your digital tokens to purchase goods or services.

Making matters worse, there are no guarantees that decentralized exchanges will provide their members with Form 1099 to accurately denote their cost basis and sales price. This makes it imperative that crypto investors, and even those casually using virtual currencies to buy goods and services, log their cost basis and sales price for tax purposes.

9. There’s little understanding of how this all works

Finally, and perhaps the most glaring reason to avoid cryptocurrencies altogether, most of the American public still has little to no understanding of what digital currencies are all about. A January survey released by cryptocurrency service platform Cobinhood found that only 56% of Americans knew what cryptocurrency is, and four out of five folks had no clue where to buy virtual tokens.

To quote long-term investing great Warren Buffett, “Never invest in a business you cannot understand.”

Find the Best Cryptocurrency to Invest 2020

Cryptocurrencies have performed debatably in 2020, yet are continuing to attract new investors in 2020.

However, most beginners have difficulties finding the best cryptocurrency to invest in 2020. We’ve all been there, so don’t worry! I understand how confusing it is when you first begin looking for new cryptocurrency investments. And that’s why I’m here to help.

So, are you also looking for the next cryptocurrencies to invest in 2020? Do you find yourself wondering “Should I be investing in Bitcoin?” or “Should I be in investing in Ethereum?”

Well, wonder no longer! I’m here to answer all your questions. By the end of this guide, you’ll know how to find cryptocurrencies to invest in 2020.

But first, let’s talk you through the recent growth of cryptocurrencies.

Table of Contents

Cryptocurrency Market So Far

The first cryptocurrency, Bitcoin, was invented back in 2009. That was just the beginning though, and nobody really knew about Bitcoin until 2020. Additionally, no one even thought that it might become the best cryptocurrency to invest. However, since 2020 the cryptocurrency market has seen huge growth — growth that has been hard to ignore. Such growth and market size can be compared to some of the very traditional retail markets, for example, multibillion mattress market (you didn’t think of it, did you?). This market has experienced a vast growth of such skyrocketing mattress companies as Casper or Nectar, very similar to Bitcoin and Ethereum rising in the digital world. There are now more than 1500 different cryptocurrencies, all created in less than 5 years.

It’s clear that 2020 was the year crypto really blew up. The market cap of cryptocurrencies grew by 4000%! The market cap of all cryptocurrencies was around $21 billion in March 2020, whereas it is now over $454 billion. That’s huge!

Market cap: The total price of all coins added together.

The cryptocurrency market isn’t just about Bitcoin anymore. There are other cryptocurrencies that have entered the space, such as Ethereum, Litecoin, and Ripple. All of these have performed incredibly well over the last year and are the best cryptocurrency to invest in.

The following chart from CoinMarketCap shows the growth of cryptocurrencies over the years.

There are a lot of things being said about the future of cryptocurrencies. Some people believe that the cryptocurrency phase won’t last long, while others think they’re going to be around forever.

It is difficult to predict the future of cryptocurrencies, but what I do know is that the popularity of cryptocurrencies is only increasing. One of the reasons why cryptocurrencies are becoming more popular is because of blockchain technology, which is the main technology behind all cryptocurrencies.

Blockchain technology is the next big thing – it is secure, trustless technology that was first used by Bitcoin. You can’t learn how to invest in blockchain, though. Instead, you can learn how to invest in the cryptocurrencies that use blockchain (which is all of them!)

Are you ready to find out about the next cryptocurrency to invest in 2020? Well, let’s get started.

So, what are the Best Cryptocurrencies to Invest in 2020

Best Cryptocurrency to Invest 2020: Bitcoin (BTC)

If somehow, you’ve only heard of one cryptocurrency, it’s probably Bitcoin. It is the biggest cryptocurrency — it currently has a 40% i share in the total cryptocurrency market cap! It is the oldest cryptocurrency and it still dominates in the market. So, if Bitcoin continues to increase as it did in 2020, then investing in Bitcoin might be a good idea for 2020.

The price of Bitcoin changes a lot every day and has seen many highs and lows over the last few years. Take a look at the following chart and you will see just how much the price changes.

The price of 1 Bitcoin has gone from around $76 (07.09.13) to as high as $20,000 in December 2020. But then after Bitcoin reached its highest point in December, the price of Bitcoin dropped to around $6000 in February 2020 and has been dropping even further ever since. It’s crazy!

With the price changing so much in such a short space of time, how do you decide what the best time is for investing in Bitcoin?

Well, we can try to find the answers by looking at some important past events — when the price went up or down by a large amount.

  • One major event was when Bitcoin split into two cryptocurrencies — Bitcoin and Bitcoin Cash. This happened August 1 st Investors who knew about this invested their money before the split and made huge profits, almost doubling their investment!
  • The price of Bitcoin dropped to around $10,000 in January 2020, almost half of the $20,000 it was worth in December 2020. Many investors became worried at this point and started selling their Bitcoin. This caused the price to fall to around $6,000 in February 2020.

Bitcoin Investing

If you want to invest in Bitcoin then you need to stay up to date with the latest news and trends around Bitcoin. When news is released about a new technical improvement, you might want to think about buying Bitcoin. If there is a huge fall in price of Bitcoin, then that too might be a good time to buy Bitcoin because you can buy it a low price.

If you have already decided to invest in cryptocurrencies, then it might be a good idea to start by investing in Bitcoin. Even though you have missed the first major opportunity to invest, investing in Bitcoin could still be a good idea.

It all depends on whether you believe in the future of Bitcoin. If you believe in it, you should think about investing in it. If you don’t, then I recommend that you stay away from it. It’s the same with any investment!

Best Cryptocurrency to Invest 2020: Ethereum (ETH)

Towards the end of last year, the price of Ethereum was slightly higher than $720, with a total market cap of around $70 billion. At the beginning of 2020, Ethereum climbed and reached its highest price of $1423 on January 4. At this time, the total market cap for Ethereum was at $138 billion!

Ethereum grew by about 3000% in the year 2020 and became the second largest cryptocurrency, placing second behind Bitcoin.

Are you asking yourself, “Should I invest in Ethereum?” or “Is the price of Ethereum already at its peak?”. Well, the truth is, nobody knows! However, the following information should help you decide whether investing in Ethereum is a good option for you.

The chart below shows how Ethereum has grown over the last few years.

Below are the key events that have most affected the price of Ethereum in the past:

  • Ethereum received an investment of around $150 million in May 2020. As a result, its price went up from $1 in January 2020 to around $14.80 in May 2020.
  • However, On June 18 th , 2020, members of the Ethereum community found out that Ethereum had been hacked. Around $60 million worth of Ether (Ethereum’s currency) was stolen due to a flaw in a wallet. This caused the Ethereum price to drop from the high of $21.52 on 17 th June 2020, to $9.96 on the 18 th June 2020.

Unlike Bitcoin, Ethereum is not just a digital currency. It is a more advanced blockchain project. This is because Ethereum offers something special — by using Ethereum’s platform, developers can build their own cryptocurrencies.

Imagine that you would like to build a blockchain-based solution for managing the supply chain of your business. Well, thanks to Ethereum, you don’t need to start from the beginning. Instead, you can just build an application on Ethereum’s blockchain. Ethereum makes it much easier for new blockchain projects to launch.

So, is Ethereum your next cryptocurrency to invest in 2020?

I recommend that you think about adding Ethereum to your list, as I think it could be one of the best cryptocurrency to invest 2020.

Julian Hosp, a blockchain expert, said that the market cap of Ethereum could rise to $200 billion by the end of 2020. If Hosp’s prediction is correct, the price of Ethereum will reach up to $2000. Hosp’s reason behind the prediction is based mostly on the ICOs (Initial Coin Offerings) that decided to use the Ethereum blockchain in 2020 & 2020.

Ethereum also plans to improve their technology a lot this year, with new protocols almost ready to go. So, watch out for Ethereum!

To learn more about Ethereum, read our Ethereum vs Bitcoin guide.

Best Cryptocurrency to Invest 2020: Ripple (XRP)

Ripple, also known as XRP, was one of the best performing cryptocurrencies in 2020 with growth of around 36,000%! Yes, you read that right. It grew from almost $0 at the beginning of 2020 and reached $2.4 in December 2020 — as you can see in the following chart.

Like all other cryptocurrencies, the price of Ripple has also decreased in 2020 — it is currently set at $0.36.

I know what you’re thinking — you missed a great opportunity by not investing Ripple in early 2020. While that’s true, Ripple could still be a good option to consider as your next cryptocurrency to invest in 2020.

Even though the price of one XRP is a lot lower than the price of one Bitcoin, XRP is still the third largest cryptocurrency by market cap. In May 2020, it had a total market cap of around $35 billion.

So, what is it about Ripple that has made it so popular for investors?

The main reason for Ripple’s popularity is that it is not just a digital currency, but also a payment system. Ripple uses blockchain technology to make international payments securer and faster.

If you tried to make an international bank payment today, it would take around 2-10 days for the transaction to process. The same payment, when done using Ripple, takes a few seconds. How awesome is that!

But there’s more good news – many large financial institutions like American Express, JP Morgan and Santander are already using Ripple’s technology. Also, Ripple has been working with the Saudi Arabia Central Bank, China’s LianLian International and other banks from around the world.

So, if you’re wondering how to invest in blockchain, then Ripple might be the best answer.

Based on what I just explained, Ripple’s future in financial industry could be a good one. You should watch out for Ripple and learn more about their partnerships. Look out for new partnerships too — if Ripple signs a contract with another large bank, then it could increase the price of XRP.

The investors, who understood the services that are offered by Ripple, have made a lot of money. After a fantastic 2020, Ripple could just be the best cryptocurrency to invest in 2020.

Note: Now might be a good time to invest in Ripple, as its price has dropped 70% lower than it’s an all-time high of $3.4 in January 2020.

Best Cryptocurrency to Invest 2020: Litecoin (LTC)

Our list of what is the best cryptocurrency to invest in 2020 cannot be complete without Litecoin. Just like Ripple, Litecoin showed great performance in 2020 with a growth of almost 8000%.

The price of Litecoin grew from around $4 at the beginning of 2020 to a high of $358 in December 2020. However, just like most cryptocurrencies, Litecoin also followed the price trend and dropped to $110 in February 2020.

Take a look at Litecoin’s price chart below — you can see the quick rise in the price of Litecoin at the beginning of 2020. The price of both Litecoin and Bitcoin has followed a similar trend over the last year.

Litecoin is the 5 th largest cryptocurrency with a market cap of around $11 billion. Litecoin continues to interest investors because of its close connection to Bitcoin. Providing a good reason for Litecoin to be on our list for the next cryptocurrency to invest in 2020.

Litecoin was created in 2020 to improve upon Bitcoin’s technology. Litecoin completes a transaction 4 times faster than Bitcoin. However, unlike Bitcoin, the maximum number of Litecoin is capped at 84 million — 4 times more than the coin supply of Bitcoin (21 million).

Litecoin was the first cryptocurrency to perform a Lightning Network transaction in May 2020. Using the Lightning Network, 0.00000001 Litecoin was transferred from Zurich to San Francisco in under one second! Once Litecoin starts using the Lightning Network, it could increase the price of the Litecoin!

Lightning Network: A new technology that increases the speed of transactions on the blockchain network.

Investment Strategies: Let’s Make Something Clear

How do investors make decisions they want to invest in real estate or stocks? Do they start making investments the moment they think about it? My guess is that the answer to that question is – no!

Before you invest in anything, you need a clear understanding of what your investment goals are and how you will achieve them. You want a good idea of how long you are prepared to keep your investment open, and what amount of profit you are happy to take.

You should have the same mindset with cryptocurrency investments. Before you decide what the next cryptocurrency to invest in 2020 is for you, let’s discuss the two main types of investment strategies for cryptocurrencies.

Long-term Cryptocurrency Investment

A long-term investment is one where you expect a cryptocurrency to perform better over a longer period of time. Simple! Normally, the minimum time for long-term investment is 6 months to 1 year. Although, some people plan to hold onto their investments for 5-10+ years. It’s up to you how you choose to invest; you can either make your full investment in one go, or you can invest at different times.

Long-term Investment Strategy

Once again, before investing any amount, you must have a clear idea of what your investment goals are:

  • Will you sell the cryptocurrency after a certain amount of time or will you sell it when it reaches a certain price?
  • Will you sell off your investment at once or will you sell parts of it at different times?
  • On what occasion would you sell the long-term investment in the short term? For example, if new laws come into place that could affect the long-term price of your investment, you might consider selling it sooner.

Next, you should do some research to decide which cryptocurrencies are best as long-term investments. I recommend that you check for the following:

  • Is their technology better than their competitors?
  • Do they have a strong team of founders and developers?
  • How good is their roadmap/plan?
  • Are they solving any real-world problems?

If you really believe in the cryptocurrency you invest in, you should learn to hold on to your investment even when the prices drop. If you ‘panic sell’, then you could lose money and regret selling.

Reasons For Making Long-Term Investments

  • Long-term investing makes your life easier as you don’t need to watch the market all the time
  • You believe that some cryptocurrencies will give a better return in the long-term
  • You truly believe in the future of the cryptocurrency

Short-Term Cryptocurrency Investment

Short-term investments are made over shorter time periods in the hope of making quick profits. So, just how short is a short-term investment?

Short-term investments can take seconds, minutes, days or even a few months.

How Do Short-Term Investments Work?

Just like long-term investing, you need to have clear goals for your investment. You need to be asking yourself:

  • What profit are you expecting to make from this investment? This will give you an idea of the price at which you should buy/sell the cryptocurrency.
  • How much of a loss will you accept? This will help you control your losses if the price of cryptocurrency suddenly drops.
  • Do you have time to study and follow the crypto market and the news?
  • Can you make technical analyses of the crypto market? If not, then you should learn before investing.
  • Will your short-term strategy give you higher returns than a long-term strategy?

You need to find out which is the best cryptocurrency to invest in 2020 for the short-term. Cryptocurrencies that have the following are good options for short-term investments:

  • Low market cap
  • High trading volume — lots of people are buying and selling it every minute
  • Are currently trending on the news and on social media
  • Have an ICO or have just finished their ICO — try to get them at a low price

While cryptocurrencies like Bitcoin and Ethereum can also be traded in the short-term, you should think about investing in the newer cryptocurrencies. Investors have made huge profits in the past with short-term investments – including some of the major, but newest cryptocurrency investments like NEO, Stellar, IOTA, and NEM.

The main advantage of short-term investments is that you can make a lot of money in a short amount of time — they have made a lot of people rich quickly. However, they still have their disadvantages.

So, what are they?

  • They take up a lot of time and effort as you need to watch the market prices constantly
  • It is a riskier investment and can result in greater losses because of how much the price changes in a short time
  • It can be very stressful and emotional

It’s difficult to say which is the better option of the two investment strategies. It all depends on your goals and experience in the cryptocurrency market.

If you really believe in a project, then I recommend that you invest in the long term. However, if a project is new and is generating a lot of attention, then short-term trading could be the better option.

Final Words

While cryptocurrencies can give you huge profits, you must be prepared for one more thing — to lose money. Remember, your predictions won’t always be right! Nobody truly knows what is going to happen to the price of a cryptocurrency or any other investment.

Do you know what most of the expert cryptocurrency investors say? You should only invest money that you are not afraid to lose. It’s great advice, so always remember it!

So, this is the end of our Best Cryptocurrency to Invest 2020 guide. I hope that you now know which investment strategy will work best for you and that you have a good understanding of what makes a good investment.

Which of the cryptocurrencies I mentioned is your favorite? Do you have a pick for the best cryptocurrency to invest in 2020?

*Note: this article is a personal opinion. Before making any investment decisions you should consult with a professional.

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28 Comments

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Thanks for putting up this great list of cryptocurrencies. EOS and wanchain from a personal perspective are cryptocurencies to invest in right now

Truly helpful……thanks a lot

Google Anonutopia if you want the next big thing.

It has been great for me to read such great information about. I bookmarked this post for future reading and must share with my fellow. Thanks for a bunch for sharing.

nice article but the best cryptos in my eyes are not these mentioned . the best technical advance has zilliqa and this is my personal longterminvestment. when you see the pricechart you can also expect a lot from this crypto. and for shorttermtrading you did not mention any crypto. at the moment moeda loyalty points is a good shorttermcrypto. and there are some nez listed cryptos on binance which are great for shorttermtrading.

Wow, these are NOT going to moon. The coins that are low and worth investing in NOW are: XLM (stellar lumens) which is currently at 23 cents, is going to be 50 cents by December, and is easily going to be over 4 dollars by 2020.

Another coin to invest in would be Electroneum, but only if it falls below $0.01 again. Right now, it’s too high, but keep an eye on it.

The only coin on this list I agree with is XRP, as it has potential, but is more of a gamble than a sure thing.

Hi, I must say that it is a very valuable blog.. kudos to you. I have always been keen into knowing more about cryptocurrencies. I have written blog on the same topic as well.
Hope it helpful. Have a great day!

You should do a study on karatcoin by Karatbars International, CEO Harald Seiz. I believe this is a great investment.

Thanks for sharing useful Information. I appreciate your Content. i love your Blog. Keep Sharing!

Great! Your article has given answers for many of my doubts. Hope this article would be very useful for all the crypto investors. Keep up the good work!

thanks for this information,I really appreciate it.

I real want to invest in either currency. But how do I do it. I mean how to join? Otherwise thank you for your information.

g8 mind, keep up

GREAT BUT YOU DIDINT TALK ABOUT THOSE SCAMMER INVESTMENT ONLINE THEY START WITH BCT OF $ 10 AND RUN WITH MONEY OF MANY PEOPLE WHO IS NEW ON CRYPTO….

Sounds great. There is no doubt about it, market that dips and crashes like this are difficult to deal with. No matter what happens with this market, this is the best time to invest in cryptocurrencies because these coins you see going down now will go crazy higher in no time. The prices of these cryptocoins are volatile, it goes up and down all the time. They act like it’s falling apart. The market is still much higher than it was some years ago. If you ever thought about cryptocurrency as an investment, then you’re on your way to greatness. I urge you to listen to what I have to say. Because if you make the right pick you could find your self jumping for joy on top of an enormous pile of cash. Ready or not , a growing number of economies, banks, billionaires are backing this new forms of tender. And once you understand how easy it is to make profit from cryptocurrencies it’s easy to see why the cryptocurrency market is preparing to take off. Anything you’ve seen up to this point is going to be shadowed by the amount of money that is about to come pouring . And for investors who get in before the end of the year , they are going to make it big and earn an unbelievable amount of profit as far as you make the right pick of coin to invest or apply a currency prediction software to help know and select the right coins with value and potential to rise in no time to invest in as digital currencies are going to be once-in a life time opportunity. The only caveat is that you must act quickly and smart then invest with a good and trusted platform to help make the right pick or choice of coins with value and to invest in. Investors who wait idly on the sidelines until the media tells them to ‘buy now’ are going to lose out on millions and potentially billions of dollars . And if you wait for the media to tell you when cryptocurrencies are safe you’ll be losing out a great deal. I am not talking about buying bitcoin alone. I am not here to double or triple my money when I can potentially create 10times, 100times or even 1000times my money investing in ethereum and other new coins which have potentials. In just few months I’ve made nothing less than $100,000 investing in ethereum and other coins . My rules for buying cryptocurrencies if I want to keep my 98% win rate are thus; The asset must have intrinsic value, The asset must be new, but not too new. The digital currency boom that’s happening right now is a once-in-a-life time opportunity. You may never have the chance to make this kind of money this easily, ever again. There are lots of tiny digital currencies that can generate higher gains more than bitcoin and the rest which people can invest in and cash out big.

I really need to be guided on how to invest on crytocurrency which one to invest one..

Crypto 101: Is Investing in a Cryptocurrency Worth It?

Investing in something new can be a hard decision, especially when you’re dealing with money you’ve saved up or earned from previous investments. If you’re on your way towards financial independence, or if you want to grow your assets and your portfolio, you’ll likely want to know everything there is to know about a potential investment before you move your money. The same process can be applied to cryptocurrency, which a lot of people tout as something with huge potential in the market in the near future. And considering its performance in the market today, people may be interested in finding out just what all the fuss is about. If you want to get to know cryptocurrency on a basic level, this article is for you.

What is Cryptocurrency?

Before you think about investing in a cryptocurrency, it might help to learn what a crypto is and how it can affect you as both a consumer and an investor. In essence, a cryptocurrency is a cryptographically-secure digital currency. It’s a virtual asset built from blockchain technology, which makes it decentralized, gamified, and most importantly anonymous. Theoretically, crypto can’t be controlled by a singular entity or government because of its nature. As a kind of blockchain, cryptocurrencies have three (3) major components, all of which are its major competitive points in the market:

  • Decentralization, where a bank or government isn’t needed to ensure that the crypto functions. This offers a great deal of financial freedom and democracy to users, as they decide what kinds of services and products they’re going to pay for.
  • Gamification, where users have to collaborate to “check” everyone’s transactions for rewards. Cryptocurrencies rely on computing power to “solve” cryptographic puzzles that allow changes to be made in the currency. Collaborators in this regard earn a portion of that currency as a reward, similar to how experience points are shared in multiplayer games. Gamification of cryptocurrency motivates users to collaborate and ensure the survival of crypto for their benefit.
  • Anonymity, where the robust security advantages of cryptography almost always ensure users of the cryptocurrency won’t be identified. And since all owners of the cryptocurrency will record all changes in transactions, anonymity is practically guaranteed.

Is it Worth Getting Into Crypto?

With the above in mind, it helps to identify whether or not these points actually matter when it comes to the full potential of cryptocurrencies. Is it even worth investing in cryptocurrency given its technical nature? It might help to check out both its advantages and disadvantages:

Advantages: Cryptocurrency makes transactions much easier and secure

People find cryptocurrency extremely appealing because of its potential to make digital transactions more accessible, much easier, and more efficient across different kinds of people. This can make credit more accessible to everyone. Here are other advantages:

  • Get more control over your own transactions. Due to the secure nature of crypto as a form of currency, most – if not all – control over what happens to your cryptocurrencies fall under your control. This means no legal representatives, no agents, and no brokers will be required – no commissions, brokerage fees, paperwork, and complicated things that might otherwise deter you from handling your own transactions. Crypto essentially “cuts out the middleman” and as such makes transactions much easier to manage, audit, and clarify between parties involved.
  • Democratize credit amongst a lot of people. According to some studies, around 2.2-billion people in the world have access to mobile phones or the Internet but at the same time have no access to traditional systems of exchange or banking. This is a lot of wasted potential in the market, and this is a lot of opportunities wasted on the part of consumers to take advantage of credit and investment opportunities. Since crypto needs to be handled on a digital medium, a lot of smartphone and internet users may be encouraged to participate and democratize the market. This is advantageous on an international level, as there’s no need for unnecessary levies, transaction charges, interest rates, and exchange rates.
  • Secure and adaptable. Cryptocurrencies are, by nature, protected by strong cryptographic encryption. This practically secured transactions against account tampering and fraud. At the same time, this guarantees the protection of consumer privacy as well. Likewise, the advanced technology involved in the making of crypto also paved the way for “general-use” crypto and crypto used for specific purposes. The flexibility of crypto as a medium has led people to create around 1,200 unique variants of cryptocurrencies, some of which are cryptocurrencies programmed to be used for specific purposes and industries.

Disadvantages: It’s still relatively new in the market

Granted, cryptocurrencies have been around for quite some time in the market. Unfortunately, it’s not as exposed to the general public given the rather technical nature of the currency. Despite its advantages, the image people have of cryptocurrency remains as “that complicated market.” Unless this is removed, or crypto becomes more accessible, it can become hard for people to trust crypto at large. Here are other disadvantages:

  • Lack of merchants makes crypto seem impractical. If we’re touting crypto as a form of currency, we should be able to use it in markets, right? Well, yes and no. Granted, we’re able to use cryptocurrencies in some markets and stores. Unfortunately, it’s not that “well-known” enough to be a widespread thing. This can make the idea of crypto investing a bit “off” for others, as while crypto is still unknown in majority of markets today, it’s really going to be beneficial as a form of investment. The good news here is that more industries have started to show interest in the potential of crypto as a form of currency – but it might be a long way to go for this to work out in the long run.
  • Technical nature might turn off consumers. Unlike other forms of stocks and investments, crypto might perhaps be the most technical-intensive of all of these. And considering how trading in itself can be a niche activity, the kind of familiarity people will need before trading crypto might turn them off from the concept. Of course, learning about anything can be difficult at first – and in the case of crypto, the learning snowballs, the more people start reading about crypto. However, finding a good place to start and what to read next can be a bit overwhelming for beginners.
  • Inconvenience in acquisition and maintenance. Building on the above, cryptocurrency can be quite a bit to handle for those who aren’t familiar with how blockchains and crypto work. For instance, if we do want people with better financial knowledge like our parents to handle cryptocurrency, they might be overwhelmed with what they have to study before even being able to handle crypto. Not only do they need to be familiar with an exchange, they need to have a wallet to maintain the crypto as well. If they want to earn rewards with mining, they also have to invest in a PC. These can be overwhelming for newcomers.

Conclusion: Worthy Investment, Considerable Risks

At the end of the day, it’s important to understand that despite the innate potential of crypto as a form of a financial asset, you shouldn’t solely rely on crypto for your portfolio. Like any other stock, you should diversify your crypto investments and make sure you study your niche enough that you know when to switch, pause, and even stop your investments entirely.

While there are indeed a lot of advantages on crypto’s end, there are considerable risks from potential government intervention, how crypto in itself is used, and whether or not it can grow to be a reliable means of transactions in the future.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency and read our full disclaimer.

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