- Cryptocurrency attracts many more fraudsters than traditional forms of investment. This is connected with two phenomena – first of all, cryptocurrency is often invested by non-professionals but complete laypeople. Secondly, cryptocurrency is a relatively new form of investment, framed by many myths. Very often, under the illusion of investment in the digital currency exchange market, various crooks try to drag their victims into financial pyramids or send out viral software. Investing in cryptocurrency, you have to be much more careful than in the stock exchange or forex.
- Cryptocurrencies are incredibly variable. This is both their advantage and disadvantage. Thanks to this same feature, you can earn a lot of money on cryptocurrencies. However, they are incredibly unpredictable, resistant to technical analysis, and many tools that work well, e.g., in the study of stock market quotations. When Bitcoin started to fall suddenly and quickly, it surprised almost everyone, and nearly all the predictions as to when the trend will rotate turned out to be entirely wrong.
- Nevertheless, cryptocurrencies can be analyzed like any other asset. However, one should be aware that the results of technical analysis in the case of cryptocurrencies are much less reliable than in the case of traditional investments. However, nothing stands in predicting the behavior of cryptocurrencies pairs without using a similar tool, as in the case of conventional forex currency pairs. This is always a better decision than trying to make a blind bet.
- Altcoins are an excellent way to invest, as long as you know your way around the crypts themselves. Altcoin is any currency created after the success of a Bitcoin and is intended to repeat its success. Some altcoins work on a very similar system to Bitcoin, but some try to improve the system or even build a cryptocurrency on entirely different principles. The important thing is that altcoins in the initial phase of existence cost little to multiply their value in case of success – exactly as Bitcoin did. So altcoins are a bit like racehorses – if you bet on a good one, you can take the whole pot, without the need for constant trading.
- Cryptocurrencies tend to make very deep corrections. This is another feature resulting from their variability. Correction at the level of 30-50% of the price drop in cryptocurrencies is a daily routine than a rare treat for investors hunting for deep corrections. Again, this is both a disadvantage and an advantage. By buying deep-correction cryptocurrencies, the investor can very quickly double his capital when the price returns to the trend. However, there is a very high risk of confusing the deep correction with a simple reversal trend.
- The cryptocurrencies are very vulnerable to political and economic activities related to them. On the one hand, cryptocurrencies are decentralized and independent of banks or corporations. However, one must remember how much their status depends on the level given to them by individual countries when it comes to calculating and settling taxes on turnover and investments. As a result, as soon as governments take action that may harm the status of cryptocurrencies, virtually everyone’s quotations started to fall immediately. Record holders of the fall counted a fall of up to 90% of the value, all in one day. So until the cryptocurrencies are adequately regulated, their rates will be highly dependent on current governance arrangements.
Therefore, a potential entrepreneur has two paths either to treat the encrypted as any market asset or try to trade or to invest in the long term in the hope of a drastic price increase. Which way is more comfortable? Most experienced traders will probably find the second way easier. Many cryptocurrencies charge high commissions when trading. Their changing nature makes it sometimes best to buy a package, than forget about it for two years and return rather than to operate daily in a continually changing market. Sometimes, however, cryptocurrency traders are gaining a lot more at it. For example, because they are updated continuously and in such an unstable environment, they can sense when it is worth withdrawing money and never returning to a given cryptocurrency again. One thing is sure, neither Bitcoin, nor Ethernum, nor Monero will acquire value indefinitely. Perhaps the frenzy for cryptocurrencies will soon be over. The market will stabilize and attract more traders, creating a second, alternative stock market organism.
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