Altcoins are a hot investment at the moment, as the market rapidly shifts and the financial community warms to the many ideas that altcoins and blockchains offer. Like any hot market, the temptation to jump right into it is almost irresistible. But cooler heads should prevail: Invest rashly in any hot market, and you might get burned.
Remember the Fundamentals
First of all, altcoin investments are no different from stocks, bonds, forex, or any other asset. Before you put down a single cent, you need to understand what you’re buying and how it works. Bitcoin is an excellent example; what’s currently driving the market? How volatile is it? What are the risks? Add to this the fact that altcoins are a technology as well as an asset, and you’ll have a lot to get up to speed on before you buy.
So, before you commit any money, read carefully about the altcoin you’re considering and what it’s trying to do. There are coins with concrete goals, such as mediating the prices of commodities, bolstering the transparency and accountability of industries, or using altcoins to speed up traditional financial transactions. Sometimes you may want to invest in the company behind the coin instead of the coin itself.
Brace for Market Shifts
One of the realities of altcoins is that because they’re so new, the legal, financial, and regulatory framework for them is still in its infancy. As countries move to regulate (or even ban) some or all altcoins, that can have drastic effects on the market price. This is especially true of altcoins that are untethered to any other commodity or asset, and thus only have the faith of their investors to support their price. If bad news arrives, so will a roller coaster.
Similarly, like any hot market, there are a lot of questionable investments out there. These range from the eternal problem of the overly optimistic investor to the outright fraud. Familiarize yourself with the signs of a poorly considered investment. Potential signs include an unclear mission statement for the investment, overly pushy representatives who want you to commit as soon as possible, the involvement of people with shady records or “private” backers you can’t get any information about, or “guaranteed” and absurdly high returns. If it seems too good to be true, most likely it is.
Finally, remember that the value of any investment is in the long-term. You don’t unload your stocks every time the market takes a downward swing, and the same should be true of your altcoins. Take a moment to consider the overall market, and the specific coin you’re considering building a stake in. Can the coin’s biggest fans tell you where it will be five years out, with a plan to get there? Do you see the market for the coin growing?
It’s easy to get swept up in the hype for any investment. But successful altcoin investing is about patience and gathering your facts. Interested in investing in cryptocurrency? It’s important to know where you stand.