Many people ask this question each day and it is a common question for anyone who is thinking about getting into the world of cryptocurrencies. Anytime that we are going to put our money into anything, it is important to make sure we understand fully what we’re getting into. Today we are looking into investing in cryptocurrency and what we need to know before we get started.
Every great innovation is a risk, people dare to pioneer new ideas and try new things, the biggest companies in the world started from a small idea. But it is extremely important to know before what is a huge risk and what is worth a try. The personal computer was a great idea and people made millions from investments into that technology, flying cars? Not so much.
Cryptocurrency, or in a wider sense, blockchain, is a new technology by today’s standards, barely over ten years old at this point. How does it measure up in the world of investments and innovation? There are two sides to the story in truth and it comes both from blockchain and from cryptocurrency. While the idea of blockchain is one that is slowly changing the way we interact with one another, cryptocurrencies have become a lot more of a messy situation.
People have seen the great and sudden rise of cryptos like Bitcoin and Ether and think, if there is so much money to be made out there, I want to make some of that money too. And we have every right to do so, but if we want to make money rather than lose money, that comes with a lot of responsibility and research.
Yes, Bitcoin made millionaires out of a good lot of people, but a lot of people lost their life savings when they found out it couldn’t go up forever. And Bitcoin was a great investment but it was a huge gamble. People didn’t take the time to look into the details of it and now that it has maintained a value of over a thousand dollars a coin for some time now, a lot of people are wondering whether it was worth getting into at all. Now there is Bitcoin Cash and after that came Bitcoin SV, these were forks in the system in an attempt to create a better storage space on the Bitcoin blockchain. We can see that the two are not entirely separate from each other and are deeply affected by one another.
Another case of this can be seen in the Ethereum network, which employed the token standard to deal with similar problems. The issue with tokens is a totally different one and has more of a focus on the blockchain side of things. While from a blockchain standpoint it seems to make sense because it allows for more freedom to its users and more security on the chain, from the investment side it creates a lot of questionable trading patterns. We can never tell how much the value of a currency is if anyone can create new tokens at any day or anytime. This is one of the big issues with the Ether coin and this makes it a very risky choice if we are planning to get into this industry.
There are many other examples of this kind of thing in the cryptocurrency as well as other problems that most serious investors wouldn’t think about. Technical things that have nothing to do with finance and more to do with the internal structures of the system as a whole. Blockchain stands on three main pillars, decentralized systems, anonymous usage and security in storage, three things that are connected by their very nature. EOS has recently been facing trouble with some of its users arguing that the system is at risk of becoming too decentralized and making some investors nervous. Without the decentralized systems in place, a blockchain and indeed a cryptocurrency itself might fall to larger shareholders calling all the shots. In the case of EOS, people who have been involved from the start, fear that there won’t be any money in it for smaller shareholders or in our case, individual investors seeking to make a profit.
But don’t misunderstand, yes, there are many cases of good ideas going bad, cryptos that are created and failing to take off and, in some cases, outright scams. But remember, this is the wild west of technology and it is a complicated and deeply technical industry with many, many buts and what ifs. This shouldn’t deter us from taking the first steps into this opportunity and neither should we have to start studying the basics of programming to understand it either. The internet is full of great information which will point us in the right direction to find the right cryptocurrency for us.
For us investors out there, it is important that we do this research too. Though we may rely on charts and reporting to understand the value of a common stock, this game is slightly different. Even if we are already well versed in Forex trade and other types of currency exchange, this is a whole new ballpark. It doesn’t depend on a country’s economy as much as it does on innovation, a good development team and the hard working third parties that put in the effort to verify transactions and keep the system moving. Some good advice for us is this, get involved, understand what is at the heart of a crypto and what is moving it forward or holding it back, this will make all the difference in the world. If we are capable of reading this article, there are plenty of other articles out there talking about the great developments made everyday in this field.
So finally, to answer our original question, is investing in cryptocurrency gambling? The answer is no! There are good choices and bad choices but when we look at things critically, we can see for ourselves what is bound for success and what was always going to fail.