A Simple Guide to Your Crypto Investment

A Simple Guide to Your Crypto Investment

By | 2018-01-08T09:04:24+00:00 January 4th, 2018|Tags: , , |

With an increasing number of people investing in cryptocurrencies, the total market cap is predicted to reach multi-trillion-dollar level in 2018. Some reserved estimations claim that if the bullish trend continues throughout this year, $2bln total market cap is totally achievable by the end of 2018. Others think that it’s only a matter of time before bigger players attracted by the growing profits from the crypto transactions flood the market with enormous amounts of money. 2018 might be a game changer for the crypto world and will most likely shape the future of the whole cryptocurrency stage for the years to go.

Current immature and unregulated market could be a life-changing opportunity for many of those who want to grab a quick buck or even fill their retirement fund. If you are a freshly seasoned investor it is not difficult to get confused in this jungle by the sheer number of coins and tokens available on the market. As of today (January 4th 2017), 1385 coins and tokens altogether are in active circulation, making it rather difficult for somebody who has just entered crypto to find their 1000x slingshot coin. But worry not as this guide should help you with making your first moves and earn yourself some hefty profits in no time.

When selecting coins for investment you can divide them into couple categories:

Mature currencies – those that can ensure a steady increase of 500%-1000% a year. These coins have been on the market for a while and have rather settled position not endangered by other currencies for the time being (Bitcoin, Litecoin, Ethereum)

Solid immature currencies – the coins that have an innovative technology or an idea behind backed up by large teams of developers or even governments. They are still at low market capitalisation and have sufficient room to grow. Such coins have potential for a steady and guaranteed increase of 1000%-10000% a year (VeChain, IOTA, ICON)

The Moon Coinz – As somebody once said, with these projects, only sky is the limit. It’s not unheard-of currencies/tokens pulling out 100x-200x a year and as mentioned previously, only sky is the limit….

Then, considering you are for the quick bucks, how to identify investment opportunities guaranteeing trip to the moon? To be frank, there’s no straight answer to that question or a universal recipe that can be applied to ensure such gains. However, there are some criteria that are relatively common for coins guaranteeing such profits. Just bear in mind that the higher the risk the higher the profits are and it is your sole responsibility to minimize the possibility of being scammed to the minimum while investing your money.

With very high certainty I can say that 90% of the coins you are able to search now via coinmarketcap.com will be thrown into oblivion within the next couple years. It is not a secret that the majority of projects ride on a temporary hype and offer nothing more than an opportunity for a short ride up. Let’s imagine you were the early buyer and sold at the peak time. In this case you should have been able to cash out some nice profits there. But it is important to understand that for the majority of the new investors the only indicator of good buy is the steady green number indicating growth of the coin. When the coin starts mooning it is usually too late to enter and some weak handed investors sell it at the first dip anyway. That’s why it is crucial to do your own research before you entrust your capital to anyone.

Coin’s Market capitalisation and its maturity

First thing you should take into consideration is the total number of tokens that have been issued and its circulating supply. This may drastically vary from coin to coin. Take as an example Ripple (XRP), with a total supply of 100bln tokens, roughly 38,7bln are currently in active use. The total market cap value of a token is the circulating supply multiplied by the current price each single unit is valued at. Let’s assume you expect a 500% quick gain on Ripple. What would that mean? It would require an increase of Ripple’s market cap to a rough $655bln which is slightly below the value of the whole crypto market at the moment of writing this article. I am not saying this is unrealistic (laws of physics do not apply to crypto) but this is most likely NOT happening any time soon. Perhaps over the course of next couple months but not within next couple days or even weeks. Also, pay attention to the difference between the circulating supply and the total supply. 38,7bln Ripple tokens accounts for less than 40% of the total supply. This may suggest that somebody (Developers?) is in the possession of the other 60%. That opens the possibility of price manipulation as whoever is in control of the other 60% can flood the market with coins significantly affecting the price as a result.

Take for example another currency: Spectrecoin (XSPEC). It’s a heavily undervalued project as for what it offers up to date. The total circulating supply of less than 21mln tokens multiplied by $4.72 totals at $98m leaving enormous space for growth considering its potential. Even a twentyfold increase in price would land XSPEC in a mere top 30. Increase the price by a factor of 60 and we are barely breaking top 15. What it all means is that it is more difficult for coins with total supply and the market capitalisation counted in billions to suddenly uncontrollably moon and you should look for undervalued projects with enough room for increase.

Do your research

Prior to any movement you should spend at least couple hours trying to research the project and ask yourself few question before jumping on the bandwagon.

  • What has it got to offer that other have not?

Projects that offer real life application should be your first investment before you get into more risky coins. Try to investigate what idea stands behind the project and how can it benefit the world. Look at VEN’s success and their idea of developing a system of encrypted chips ensuring that the product you purchase are genuine. Now, after a brief research you could have come across the news about China Communist Party’s recent initiative to curb on the counterfeit products flooding domestic Chinese market. 1+1=2. Now… have a look at VEN’s progress since December.

Projects with tangible application that can benefit the world have the highest possibility of succeeding in my opinion.

  • Are the developers anonymous?

This criterion should be taken with a grain of salt. Some developers stay anonymous for a reason. I can completely understand why somebody developing a secure currency enabling its users to transfer funds without being tracked by anyone would want to stay off the radar of the governments. This might not always be the case and it should be applied critically considering other reasons for which developers want to keep low profile. Focus on project development? Avoid fame?

  • Was it pre-mined?

Some minable coins have been largely pre-mined prior to blockchain being released to the public. The examples of such currencies are ZCash and Dash. Dash was released with 2mln coins pre-mined out of 7 total supply. The developers can flood the market any time affecting the price based on supply/demand law.

  • Has it got a technical whitepaper (technical description) publicly available?

A technical whitepaper explains the details of the technology behind the project. This is usually the first thing you should look for while evaluating the risk. Depending on your technical proficiency it might be either useless or turn out to be a great source of information revealing perks that other projects lack. Be weary of investment opportunities that lack whitepaper or provide one with predictions not based on any tangible evidence.

  • How many of the tokens have been distributed during the ICO stage? How many were given to the developers?

Similar to the pre-mined thing discussed above. Large chunk of coins kept by the developers during the Initial Coin Offering (ICO) stage may or may not suggest that the creators might want to slowly release the coins once the project matures and live off the profits. Some projects freeze the developers’ coin assets for a certain period of time to ensure satisfactory price in the early stages of its release. This should be mentioned in the whitepaper.

  • Which exchange markets offer this coin?

Some coins and tokens are offered on certain exchanges only. There are obvious pros and cons to that. Some real pearls can be found on Cryptopia and C-CEX right now (such as XSPEC or XBY). Converesely, some exchanges do not accept projects at early stages of their development (e.g. Binance) and you will find currencies that have had their ICO stage couple months or years before. In this case you might be buying at 300 Satoshis instead of 5. Higher standards at certain exchanges are meant to increase investor’s satisfaction and ensure that no scam coins are ever offered. Therefore, you are trading satisfaction over some mad profits if you invest elsewhere in a project you sincerely believe is genuine.

  • How strong is the marketing?

There are cases of some great ideas that lost out to inferior projects due to insufficient marketing. Marketing can work wonders right now (Justin Sun + TRX). Be cautious with the project that emphasise their marketing and hype over anything tangible that they can demonstrate.

  • Where can you store it?

This is also worth considering as keeping your funds on an exchange should be considered only as a last resort. Can you store it in your EXODUS wallet? Can you store it in your Ledger S Nano? Is this an ERC20 token that you can add to your MyEtherWallet.com? Having separate wallets for every currency you invest in might not be very convenient and has to be considered but unfortunately this is one big inconvenience you need to deal with as an early pioneer of crypto revolution.

  • BTC vs USD

Do not only look at the coin increase towards the USD but also how it does compared to BTC. Next time you are on coinmarketcap.com try to switch the view from USD to BTC and you will see that some coins do not perform that good in comparison to BTC. This could be an important indicator of how much profit over time your investment can generate. As Bitcoin is predicted to increase in value exponentially over time, it is always better to stick to coins that grow faster than BTC.

  • Check social media

Reddit, Twitter, Telegram and Discord can be great sources of up-to-date information regarding the coins you are thinking of investing in. These should be one of the first places to lurk in search of info. Developers often update about the project progress via social media and sometimes it’s a matter of minutes to make a quick decision before the market moons.

Conclusion

There is no universal rule I can sell to ensure 1000x gains within a year. However, I hope that this guide helped you understand some of the dangers related to investing in cryptocurrencies and reduce the risk involved to minimum. Remember to do a thorough research before making any decision as the more time you spend on finding information the more you will be rewarded.

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