Bitcoin’s price rose by more that 253% last year. Its lure has attracted the eyeballs of wall street sharks leading to mushrooming of bitcoin exchange traded funds. Last year has been the year of mainstreaming of revolutionary crowdfunding mechanisms like Initial Coin Offerings popularly called ICO and the awe inspiring rags to riches fortunes made in the cryptocurrency market. The investments and vision of these winners had something in common. Lets take a closer look at what separates these winners from the whiners.
Understanding of Crypto-currency market
The virtual currency markets is at a nascent stage. Such young markets are often prone to volatility.This is a basic feature of such markets and you can ignore this fact only at your own peril. You get an example of this volatility repeatedly. You saw it when bitcoin was trading at $2790.30 on 3 August 2017 and 11 days later at $4319.5. The bitcoin market has seen equally spectacular crashes. The important thing that to focus here is that major crypto currencies have come come out stronger from this trial by fire.
Cryptocurrency as future of all currency
Crypto-currency is the imminent currency and real store of value for our rapidly globalising economies. It is a panacea for corrupt banking system that has plagued the very foundations of global economy. It is a global currency of sorts and the culmination of the process of universalisation that started with the advent of internet in mid 70s. You may be familiar with Elon Musk’s views on electric cars as future of all transportation. Crypto-currency’s universal adoption similarly is a matter of when instead of if. The above hypothesis is also corroborated by new developments where Central Bank of India – RBI is looking into bringing in a fiat crptocurrency. I believe the world is still taking baby steps and the full potential of blockchain and cryptocurrencies and their applications are yet to reach their climax. Blockchain is as revolutanary a concept as Internet and will surely change the world for good.
Trading in literal sense does not work
The wisdom of Warren Buffet as he summarised “Buy Low and Sell High” does not work. Profit booking is not easy. If someone bought bitcoin at $10 and sold at $100 a year later, he is not a genius but an exemplary fool because this $100 bitcoin is worth $4700 in September 2017 and in next 5 years it can easily reach $8000-$10000. The strategy here should be to try and buy low and hold.
Avoid FOMO (fear of missing out)
Its hard to standby when you see an altcoin rapidly gaining in value. So you decide to ride that glorious wave and as soon as you board BAM !! The coin plummets and so do all your hopes and ambitions. The only strategy you need is buying the market and not the coin. I do not advise against revising your crypto market portfolio. In fact we will soon discuss how to periodically review your portfolio to keep pace with the rapidly changing realities of this market. But what I would strongly advise against is to get excited and give in to that FOMO everytime a currency gains 20% in a day.
Some tips on trading alt coins
All coins apart from Bitcoin are called alt coins. The most traded among them are Etherium, Ripple, Monero, Stratis and Neo. There are 800+ alt coins and most will eventually loose all their value. This is not to say that some may not jump up the order and replace Bitcoin as the king. In fact, it is one of the most probable eventuality. The key here is to focus all your attention on market capitalisation and volumes of these currencies and trade on most acceptable currencies. It is also advisable that you may dig deeper and in detail about these currencies and make an opinion for yourselves.
ICO : The new kid on the block
Initial Coin Offering is a crowd funding mechanism by which the creators of a project try to raise money by selling coins or tokens that represent shares of the project at low rates. The expectation here is that the coins would start trading on the exchanges and fetch profit for coin holders. There have been successful ICOs in which the investors made even 1000 % profit. However, many of the projects have been complete scams. In absence of regulatory safeguards many investors have been duped of their hard earned money. If I have to invest in an ICO, I must feel very strongly about their project. I would go to their website and evaluate their team and check their credibility. Also, find out what would be the reason for the token to be traded at all. From what does the token derive its value from. It is a fact that every ICO like any IPO is a risk. It is an investor’s job to ensure his bets are covered.
Crypto is the future and it wouldn’t harm anyone to be aware of the developments. But the worst mistake anyone can do in this market is trade daily.