Over the past few months, applications of blockchain technology have taken the world of fintech by storm. Cryptocurrencies, especially, are making the headlines as financial instruments poised to disrupt the modern, global economy.
While all of the buzz and commotion is exciting, it is important to recognize the extremely volatile, high risk (high reward) nature of these new and upcoming digital currencies. Like any financial decision, you should not justify your crypto-investment thesis with some article you read online. Rather, consult an advisor, or someone you really trust in the space, before pulling the trigger on an investment.
If you are extremely bullish on the long term implications of blockchain and cryptocurrency, then you will likely find many lucrative opportunities to “get in early” in this nascent space. For those of you who do not know, Bitcoin was the first true decentralized cryptocurrency. It was first created in 2009. Since then, a number of other tokens and currencies have come to market, all of which provide, at the least, a slightly different take on the best use case for this technology. Though many have fizzled out, there are a few, like Ethereum, which show strong long term potential.
As more and more currencies are launched every week, it has become increasingly challenging to sift through the numerous investment options and pick the needles from the haystack. Even relative “experts” in the space struggle to build stable crypto portfolios.
For new investors, it can be even more challenging to figure out who to trust and where to allocate capital and resources. There are many fraudsters profiting off of all the foolish noise that has been recently rushing into the industry.
Before making any financial commitments, it is important to take the time to learn as much as you can about the mechanics of the technology as well as the high level business use cases of decentralized systems. Although it can be overwhelming, and at times, intimidating, diving into a brand new investment channel without first fully understanding the ins and outs of what you are getting yourself into is extremely dangerous.
There are many online communities geared specifically towards helping new investors get up and running as quickly and as easily as possible. The crypto community is extremely willing to give back and help new individuals get up to speed. As a whole, most individuals in the community are just trying to spread the word about crypto, and are more than happy to help you learn! However, it is really important that you are extremely careful in this early stage as it can be hard to know exactly who to trust.
Once you are confident in your personal investment thesis and have a plan, it is time to hit the digital exchange. There, you can sign up with your bank account so that you can easily transfer funds to and from currencies. Most importantly, exchanges allow you to invest in and trade many of the most popular currencies like Bitcoin, Ethereum, and Litecoin. , perhaps the leading player in this space, insures your digital currency held on their platform so that all of your transactions are safe.
Once you have set up your information on an exchange, it may make sense to start off by playing around with many of the more established coins. While there are many interesting, perhaps more unique altcoins on the market, starting with a “relatively” safer option, that has been around and validated by the community for 6-24 months, is not a bad idea.
But once you have gotten bored of learning about blockchain as a financial instrument, you may have some fun learning and investing in initial coin offerings (ICOs). ICOs are effectively digital crowdfunding tools that enables you, as an investor, to purchase a company’s digital tokens. Blockchain enthusiasts are branding coin offerings as the modern day “IPO,” which will become the new de facto fundraising mechanism for projects of all sizes.
With brand new coin offerings hitting the market each and every day, it is becoming more and more interesting to read and learn about the different strategies entrepreneurs are taking to embed blockchain in their products. There are many use cases, operating in massive parts of the international economy, with tons of promise to make waves for years to come.
Once again, it is very important to invest with caution, as there are no prescriptive or guaranteed means for returns. And, with ICOs, you will find many “salesy” people trying to pull a fast one and get you in early on their “platform” that does not really exist. As long as you do your research, and make bias free decisions, you can likely avoid the numerous scams out there.