Today we are trying to answer some important questions people may have when they are about to invest in crypto for the first time.
Should you still invest in Bitcoin?
For those people out there that are too afraid to invest in Bitcoin (BTC) because it is currently at almost 11 thousand dollars per unit (it will probably be at a completely different valuation when you read this), don’t be. BTC is still the safest investment in the crypto world as a long term bet. It was the first currency to come out, back in 2009, it has the largest market valuation by a long margin, there will only ever be a maximum of 21 million coins in circulation (currently a little bit over 16 million) so there will never be a big inflationary impact in the currency in the future.
Additionally, and you can check this on your own on Coin Market Cap, every time the market crashes. like it just happened last week, what happens is that the global market share of Bitcoin goes through the roof. In January, BTC has been worth around 33 to 35% of the total crypto share, however during the crash that value went up to 38 to 40%, because even though people will generally unload their crypto during a crash, they will primarily convert other coins into BTC for financial security reasons. The tendency is that the share of BTC will decrease over time as the market keeps growing and other important projects become more mainstream but that doesn't mean its value will decrease. It will just be the market as a whole outgrowing it.
Why should crypto be a long term play?
What we’re trying to advocate is that if you have any mid to long term intentions of staying in the cryptocurrency market, Bitcoin should be the currency you own the most. Same goes for Ethereum (ETH), they are huge and the volume traded every day decreases the risk of them plummeting regularly.
This is a market that is wild on a daily basis, any given coin or token can have 15 to 30% variations in valuation in a blink of an eye and the reason we advise you to be diverse in your portfolio is that while during a crash, almost no coin escapes the downfall, the same isn’t applied to climbing out of the hole. The top currencies on Coin Market Cap will always have a greater chance of recovering, however there are some that have some things going against them and seem less investable right now.
Giving you a few examples, Ripple only has 38,7 billion coins in circulation and there are 100 billion in existence, meaning that the owners of the technology own the rest. While they have promised to keep releasing them over time, the risk of the market getting inflated at some point in the future and the value per coin decreasing a lot, is huge. Litecoin is another hard prediction on the long term for the simple reason that they are trying to do the same thing as Bitcoin, creating a global decentralized currency based on blockchain technology. Cardano also only has 25 billion coins in circulation while their maximum is 45 billion.
Should you still expect incredible returns at this point?
The biggest problem in investing at the moment is that if you’re coming in with expectations of getting a huge return on your money like you’ve read happened in the past couple years, it will become more and more difficult. Imagine that Ethereum, having a valuation of about 100 billion dollars right now while each unit costs about a thousand dollars, was just at 100 dollars per back in May. For the same raise to happen once more in the next 8 months, Ethereum would have a trillion dollar market share, which is twice as much as the current value of the total cryptocurrency market share!
How should you organize your portfolio?
If you do plan on owning a portfolio in this market, you should diversify it, because BTC or ETH is not safe from crashing down one day, nothing is. They are the less likely to and that’s why you should buy it. The most important thing for you to do as an investor is to read about it on your own. Learn what each project is about, the people involved in it, what they are trying to accomplish. Does it solve a need? Does it improve a current solution by a lot? If you are going to invest just based on youtube videos or cool internet posts, you must know that the marketing space for crypto is very new, completely unregulated and there are a ton of scams around.
The latest to go down was BitConnect, and they flooded youtube with content created by a lot of users that get over 200 thousand views per video posted on their channel. If you do your own research, that will obviously take longer, but it will get easier over time evaluating new projects arriving to this crazy world of cryptocurrencies. Anyone that releases content saying to buy X to make Y amounts of profit, is just luring you to invest in something they will benefit a lot if it goes up. Make your own decisions by spending time studying and learning how each technology works. You don’t want to invest in a space you don’t know anything about.
We will be releasing an article on how blockchains work in the coming days, to help you take another step in understanding the basics of cryptocurrencies and how they function. Just remember, if you are willing to invest in this market, you have to be prepared to lose 20 or 30% of your investment in a matter of hours. There will be swings ...