There are a lot of investors who regret not getting involved in the Bitcoin market. For some, it was an opportunity missed. This is considering the fact that Bitcoin was trading for just under $1,000 at the start of 2017 and now it is almost at $20,000. Many other Altcoins like Ethereum, Ripple, IOTA, and Monero have experienced positive growth progress in both exchange prices and market capitalization figures. This has led to a real and ever-increasing demand around the globe for cryptocurrencies. Investors are speculatively putting up money in ICOs and other cryptocurrency investing means like exchanges and mining subscription in order to be part of the next big thing in cryptocurrency.
Amidst the immense hype that surrounds the market, it is easy to become oblivious to the simple obviousness of the truth as far as cryptocurrencies are concerned. The market is incredibly volatile and there are massive price swings that occur on a regular basis. A coin worth $200 today can become worth $1,000 in a matter of days and crash down to being worth less than $1 in an even shorter period of time. The result is that an investor can just as easily make huge gains as he/she can lose everything. Seasoned investors will tell you that such a market is a dangerous one to invest in and the investments made on such assets are mere speculations akin to gambling.
Investing in cryptocurrencies for the long term requires a great deal of due diligence on the part of the investor. While no one can say for a bubble if cryptocurrencies are a bubble, it is evident that many cryptocurrencies are doomed to fail. An investor must be able to separate the mediocre coins with no tangible economic viability from the promising projects. Blockchain technology, which is core framework that supports cryptocurrency operation is without doubt one of the revelations of the 21st-century. This, therefore, means that there exists the possibility that a few cryptocurrencies will stand the test of time. As an investor, there are some important checklist items that great attention must be paid to in order to succeed in the market.
- Stay up to date with Market Capitalization
The two principal parameters used to gauge the value of a cryptocurrency are the price and the market capitalization. Price has to do with how much a cryptocoin can be exchanged for fiat currency, usually USD. A lot of the hype around many of the top coins on the market has to do with price. On the Internet, one is likely to find articles commenting on the Bitcoin climbing to a ridiculous price in less than a couple of days. However, as an investor, market capitalization is a much more important parameter than price when it comes to determining which coin is more suitable for investment.
The market capitalization of a cryptocoin is calculated by multiplying the total supply of the coin in circulation by the current exchange price of the coin. This value is a representation of the degree of future survival of a coin. While price is a short-term indicator, market cap, on the other hand, offers a lot more insight for long-term investors. The reason for this is due to the fact that price largely depends on market capitalization. The price of a particular cryptocurrency fluctuates based on the market cap of that cryptocurrency in relation to the total market cap of the crypto market.
On many coin ranking services, it is possible to see a coin with a lower price being ranked higher than a coin with a higher price. The reason for this is based on market capitalization. Bitcoin Cash and Bitcoin Gold have a higher price than Ether but the market cap for Ether is greater than the pair of them.
There are a number of services that offer information on the market capitalization of cryptocurrencies. Some of these services include Coin Market Cap, Crypto Compare, and Coin Cap.
- Maintain a watchful following of Cryptocurrency Online Forums
You cannot be a successful investor by staying aloof from the happenings in the market that you are investing in. Every serious cryptocurrency investor’s checklist includes subscriptions to multiple cryptocurrency online forums where they can monitor the trending news. In these forums, you get to receive firsthand information on new projects and get to see the developers interacting with the community. A lot of pertinent information that might not be published on the general web can be found here. Some of these online cryptocurrency forums include Bitcoin Talk, Cryptocurrency Talk, and Medium.
- Do not Over Diversify Your Altcoin Portfolio
Diversifying one’s portfolio is an integral part of any successful investment strategy. Diversification helps to greatly mitigate risk by spreading one’s investment across multiple streams. The likelihood of all failing is significantly lower than the likelihood of one failing. While this works as a general principle, some degree of caution is required when applying it to cryptocurrency investment.
Spreading your investments across multiple cryptocurrencies can be a risky move especially when these coins haven’t been properly vetted. There are a lot of pump and dump ICO schemes on the market and these projects are most likely not going to amount to any significant economic value. If the greater majority of the cryptocurrencies in your diversified portfolio turn out to be bad investments, then incurring great losses is all but certain.
If an investor wants to diversify his/her cryptocurrency investment portfolio, every single coin must be properly examined. The investor must carry out due diligence on these coins checking for all the pertinent information and assessing their suitability for investment.
- Learn How to “Hodl”
In the cryptocurrency space, “hodling” is a term that has come to mean holding on to your cryptocurrencies irrespective of large price spikes. The use of the term dates back to 2013 when a certain member of the Bitcoin talk forum used the term; accidentally or on purpose, no one can really be sure.
The market is volatile and as such, there will be large price spikes but it is necessary to exercise patience sometimes and see how things develop. Being in a hurry to sell can end up not being the right move to make. The ultimate purpose of an investment is to make the most of it, and that means keeping a “hodl” of your coins for just a little bit longer.
Closing Remarks
Cryptocurrencies represent a viable investment opportunity but a great deal of caution is required so as not to fall victim to pump and dump schemes. Any investor looking to succeed in the market must be prepared to do a lot of research and abide by certain principles. Many cryptocurrencies will not last the test of time but with the fact that blockchain technology is here to stay, it is a safe bet that a few cryptocoins will survive.