How to Reap Big From Cryptocurrency Investments
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Immediately after the inception of Bitcoins on January, 9th, 2009, which was the first cryptocurrency, many people must have been reluctant to implement the idea of a virtual currency, in fact, the coin was then known to a very small number of people. Whereas some critics outlined a million reasons as to why Bitcoins would fail, other supporters with one or two reasons (or none) both silently and boldly took up the idea and pumped their investments into the coin.
Currently (as per the time of writing this article), A single Bitcoin retails more than $12000. The most astonishing fact is that among the very first recorded Bitcoin exchange rates were as finite as below $1 as of October, 5th, 2009, when history records an initial exchange rate of 1,309.03 Bitcoins to One US Dollar. In 2010, Bitcoin’s price was still lagging at $0.39 as its highest price, which never surpassed the $1 mark.
Suppose I bought 1 BTC (One Bitcoin) in the year 2010 and stopped at that, I could have currently been $13000 richer, reaping unparalleled benefits regardless of whether the value of Bitcoin surges or falls.
The idea of virtualizing money has its early forms linked to platforms such as PayPal, however, cryptocurrencies came up with a totally divergent idea of virtualizing money, totally digitizing money in the most interesting ways that have never been met. After the introduction of Bitcoin, there emerged other alternative virtual currencies (altcoins) such as Ethereum, Litecoins, Dogecoins, among many others in hundreds.
What is the best cryptocurrency to invest in? How can I invest in the best cryptocurrency?
If you happen to be an investor, you must be probably looking for ‘the next bitcoin’ to invest in. The cryptocurrency world is such a dynamic one, a digital currency might be the highest in the market today and dying the next day you wake up. This means that the investor who identifies a cryptocurrency that will survive in the future and put his or her stake in the currency’s startup is the one likely to reap big.
As an investor, there are certain considerations that if well taken into account will ensure you get the highest Return On Investment (ROI). Some of these parameters that will help you thoroughly analyze the cryptocurrency market for the best potential investment include;
1. The purpose of the cryptocurrency
After the introduction and consistent use of Bitcoins, investors realized that there were different challenges facing the pioneer cryptocurrency. This led to the emergence of altcoins who aimed at solving the complexities revolving around Bitcoin.
The purpose of the cryptocurrency is one of the most vital factors to consider because it determines the continuity of the digital currency, its existence into the future. Apart from just acting as a trading asset, a good virtual currency should be focused at solving certain problems encountered by other existing forms of digital currencies; may it be the issue of security, transaction fees, privacy, the speed of transaction, acceptability across the globe, and much more.
An example of a cryptocurrency with real use cases and high prospects is the Blox (CDT) token. Established by Blox, a crypto portfolio company; Blox (CDT) acts as the unit currency for purchasing premium services.
Loyal Blox platform users earn free CDT tokens. But that’s not all. The Blox platform offers loads of uses that range from virtual altcoin trading to wallet management, portfolio tracking to copying investment moves made by expert traders.
Anyone who wants to access premium services on Blox must use the token. And since Blox services are on the rise, the token holds great potential.
2. The technology driving the cryptocurrency
When you see a high-voted cryptocurrency, do not be too quick to buy it without knowing the technology driving its various functionalities. Go as far as looking for the whitepaper detailing the technology driving the cryptocurrency. IOTA (MIOTA) is a good example of a digital currency with the most clearly outlined whitepapers. Unlike Bitcoin and various altcoins which have proven themselves on the blockchain Technology, MIOTA has come out differently by running on the Tangle Technology.
3. The developer community of the invest cryptocurrency
Top cryptocurrencies have always enjoyed a community of good developers working round the clock to keep things updated and new. Definitely, you wouldn’t want to invest in a virtual currency whose developers are good at sitting on the fence. An industrious developer community boosts investors confidence since their efforts mitigate the various risks that might hinder the future existence of a cryptocurrency.
4. The market capitalization of the cryptocurrency
Rather than rush based on the price of a given virtual currency you want to invest in; it is worth considering both the price and the market capitalization of the cryptocurrency as a whole. The market capitalization is an indication of investors confidence in a given digital currency. To determine the market capitalization of your invest cryptocurrency, you simply need to take the currency’s supply (amount in circulation) and multiply it by its current price.
A good example of why market capitalization really matters can be picked from Bitcoin Cash (BCH) and Ethereum (ETH). Ethereum currently retails at $1073 with an estimated market capitalization of $105 billion and a circulation supply of 97,210,497 ETH. On the other hand, Bitcoin cash currently sells at $1,804 with a market capitalization of $30 billion and a circulation supply of 16,923,825 BCH. This simply indicates that Ethereum is more futureproof than Bitcoin cash; it has a higher acceptance rate in comparison to BCH.
Is investing in cryptocurrency through ICO really profitable?
Have you ever heard of IPOs (Initial Public Offerings)? In the real financial world, companies have the liberty to secure funds from investors and venture capitalists, nevertheless, when they can secure enough funds to facilitate their projects, they are left with the option of going public.
During the IPO, the private companies put up their private shares for sale to anyone in the general public. At this time, the shares are very cheap and have the chance of ballooning and making future millionaires. You must have of cases where someone invested a few dollars only to turn into a multi-millionaire overtime after their shares grew into disproportionate maturities.
It is from the IPO’s concept that various stakeholders in the cryptocurrency world started wondering whether the same concept can be applied to virtual currencies. They, therefore, came up with ICOs, which share a few similarities with IPOs but unique in their own way. The major differences between the two are that ICOs are decentralized whereas IPOS have central governing bodies; additionally, ICOs are unregulated whereas IPOs are heavily regulated.
ICOs and Tokens
When you are interested in a given cryptocurrency project, you can gain access to it by sending the developers some amount of cryptocurrencies (currently Bitcoin and Etereum) and get awarded an equivalent amount of tokens. Since the introduction of Ethereum (which provides a decentralized platform where you can not only make currencies but also invent decentralized applications), the issue of tokens has been gaining prominence in the cryptocurrency world.
There are two types of tokens associated with cryptocurrencies ICOs. The first one is Usage Token while the second one is Working Token. The former serves as a native currency in their particular environments and can be traded for other fiat currencies and cryptocurrencies. The latter issues the owner with various rights in their virtual currency environment.
How do ICOs work?
- Since first impressions heavily count, the developers of a given cryptocurrency will announce their intention to attract interest to whatever they vision to develop.
- They will create a white paper, a document that highlights every specific feature of their project, and put it forward to various members of their community to get more ideas and backing.
- After receiving some solid backing from members of their community, the developers are now free to put up tokens which they will exchange for Ethereum or Bitcoin. Based on the law of demand and supply, the tokens will be of a limited supply so as to increase their demand.
- Additionally, the developers will have to decide the amount they want to charge per token, which is usually very low.
- Once their tokens and charges are ready, they will come up with the best time to hold their Initial Coin Offering.
- Finally, they will choose a platform where they can showcase their ICO and make it go public.
Precautions to take while investing in ICOs to avoid getting scammed
When it comes to ICOs (Initial Coin Offerings), you should only invest in what you know or can understand. This is due to the unregulated space of ICOs. Since you would want some assurance on Returns on Investments at the end of the day, a few pointers to the right places where you can pump in your cryptocurrencies investments include:
- The purpose of the project should be clearly defined by its developer. MIOTA is a good example of one of the most clearly defined projects.
- The developers of the project must not be some persons with anonymous identities. They should give top-notch transparency on their details such as names, physical locations, business plans, and much more.
- There should be a clearly defined legal framework between the developers and the ICO investors.
- If the ICO funds are being stored in an escrow wallet, then that is a good potential investment. An escrow wallet is a multi-signature wallet that requires multiple keys to have the funds withdrawn.
Pros and cons of investing in cryptocurrencies ICOs
- ICOs grant opportunities to promising projects that can build investors a fortune. A good example is Ethereum which has skyrocketed to being the second most powerful cryptocurrency in the world.
- ICOs do not require unnecessary paperwork which usually serves as serious bottlenecks to many promising projects.
- ICOs are a major platform of exposing various cryptocurrencies and related projects that hold the potential to positively impacting the way people run a business.
- They expose investors to potentially valuable projects. For example, during its ICO, Ethereum was exchanged at approximately 36 cents per Ether. Currently more than one thousand dollars.
- As a result of many ICOs successes, developers have been motivated to come up with even better ideas which they realize though ICOs.
- ICOs are based on pure speculations, there are more of gambles. Despite holding great hopes for the success of their projects, the developer has no idea whether the ICOs will eventually work out or fail.
- They attract a lot of scammers since there are no lots of paperwork Some developers can even go ahead and omit certain vital and binding details from their whitepapers in order to shield themselves from blame when their ideas fail.
What are examples of cryptocurrencies that made some new millionaires?
Ethereum: Unlike other many cryptocurrencies, Ethereum has consistently receiving appraisals from its investors. Its success is attributed to the speed in which the currency’s network processes transactions. During its initial release in 2015, Ethereum retailed at approximately $0.275 per Ether. The price of an Ether has continuously boomed to a current figure of $1082 per Ether. Assuming you had invested $100 worth of Ether at the time of its inception, you could be currently approximately $353,083 richer.
Bitcoins: The first cryptocurrency retailed at below a dollar, approximately $0.39 dollars a year after its launch (2010). Though facing a number of challenges, its current market value stands at $11660. If we had initially invested $100 worth of Bitcoins in the year 2010, we could currently be celebrating unparalleled benefits of close to $2,989,743. This is fantastic! This is either a win or a win for the pioneer investors.
Litecoin: Litecoin was introduced into the cryptocurrency world in 2011.On 27th, November 2013, the value of Litecoin stood at $28.40, a 400% growth from the time of its inauguration. Suppose one had invested $100 into the Bitcoin market in 2011, he or she could be currently approximately $238,028 richer, 7 years from the time of Litecoin’s inception.
What happens after investing and reaping big in cryptocurrencies?
Traditionally, if you have made some gains from IPOs investments, the profits get transferred into your bank account after which you can decide what to do with them. The case is almost similar to what happens with profits reaped from cryptocurrencies investments.
However, the safest way to secure your cryptocurrency profits is by storing them in facilities referred to as wallets, where you can use them to buy goods and services, exchange them for other altcoins or fiat currencies, or even send them back to various exchange platforms for reinvestments.
There are different types of cryptocurrencies wallets which include; software, hardware, and web wallets. Software wallets exist either as a desktop or mobile forms of software which you are required to install on the respective devices and store your cryptocurrencies.
Web wallets, on the other hand, do not require any form of installations since they are hosted and accessed via websites. As the name suggests, hardware wallets are physical devices used to store cryptocurrencies. Examples of hardware wallets include Trezor and Ledger. Hardware wallets are the most secure platforms to store cryptocurrencies as they cannot easily be attacked by hackers and viruses.
In case you feel that you have made enough profits, you can start selling your cryptocurrencies on various exchange platforms for other altcoins or fiat currencies. The procedes made from the sales can then be reinvested in other potential startup cryptocurrencies, or spent in a manner of your liking.
To Sum it Up
Investing in cryptocurrencies is such a volatile but profitable game if well played. If you want to invest in cryptocurrencies, you should equip yourself with a solid background knowledge which will act as the best indicator of whether you are most likely to reap big in the near future.
You can further enhance your cryptocurrency knowledge by looking at our many other resourceful posts. Thank you.