Key factors to note before investing in Cryptocurrencies?

People invest in cryptocurrencies for three primary reasons:

  • You want to hedge your net-worth against the fall of the Dollar, which is assumed by many people to inevitably happen at some time. This forms the basis of your intentions.
  • Who would not want free and hard money for the entire world? Cryptocurrencies have created such an environment and you are sold on it.
  • The technology behind this marvel of creation has intrigued you no end. And yes, you would now want to be a part of it.

But what stops you from going ahead and investing in it is primarily the lack of knowledge. You are unaware of how things work. Let me give you a quick brief of how to invest in cryptocurrencies.

Investing in Crypto

Invest only as much as you can afford. Do not overestimate cryptocurrencies because this is not a normal investment. The volatility of cryptocurrencies far outstrips other forms of investments. Hence, caveat emptor.

There is more to life and cryptocurrency than Bitcoin. Till 201, Bitcoin ruled the roost. It still does but the market share has fallen to 50%. The other coins are called “ Altcoins” and can be equally lucrative.

Thirdly, it is important to go through the whitepapers of all the coins that you wish to invest in. A great whitepaper is a sure shot sign of successful project, while a poorly written one is not.

After you have read the whitepaper, a few decisions need to be made:

The value of the project and what it is bringing into the ecosystem. One of the best examples of positive utility is Ethereum. One of the reasons why it took off with flying colours is because of the platform it provides to developers to create their own Dapps.

Three things one must look out for before investing in cryptocurrencies are the following:

  • Privacy
  • Scalability
  • Interoperability

The usage and importance of Tokens also need to be taken into account. Ask yourself whether the project requires tokens or not. This is to ensure that you are getting good quality tokens.

The three commandments of investigating in tokens are:

Roles

Features

Purpose

When you buy a token there are certain features that are given to you:

  • Right
  • Value Exchange
  • Toll
  • Currency
  • Function
  • Earnings

These are the properties that one has to maximise in order to get the most of the tokens in possession.