If you are intrigued by the crypto world with an eye to invest in it, there are a few things to keep track of before you take the leap.
Here are 12 crucial things to know:
Crypto regulations not yet final
The US is leading the implementation of regulatory guidelines for cryptocurrencies intended to regulate cryptocurrencies and protect consumers against bad actors. Global markets do enact their own internal regulatory policies but decisions by global players like the US set the standards.
Diversify your investments
Any investor who is uncomfortable with great investment volatility and risk should stay away from digital coin investing.
Only invest money that you can lose. Experts recommend investors allocate 2%-5% of their investment assets in crypto across other valuable altcoins with potentials of disrupting their space. There exists over 1,600 different coins and tokens in the crypto space.
Volatility is a constant
The cryptocurrency market is unpredictable and is not yet a replacement to fiat. You cannot pay someone a salary in Bitcoin because the value of the crypto could change drastically in 24 hours Educate yourself on the many price catalysts, trading or technical skills that explain the hourly charts.
Beware of scams
Since cryptocurrencies are virtual and lack a central storehouse, it’s possible for an account balance to be wiped out. A computer crash without a backup could destroy a stash of cryptocurrency.
Alex hawari: CEO, MEMOB said: “The entire idea of blockchain and crypto is based on security and transparency. Issues that made the news headline have been businesses that poorly handled their own security and fell victim to hackers.”
“Trading crypto is largely unregulated meaning that there aren’t the protections available to you that other asset classes have. Find a regulated platform to trade on, Christopher Flinos, Co-Founder, HAYVN, told AMEinfo.
“You will now have read about the death of the CEO of cryptocurrency exchange Quadriga in February 2019 and the May 2019 loss of 7,000 BTC on the Binance platform. It is reported that the Quadriga CEO held the only private keys to approximately $140m in digital currencies held on his exchange, and that clients can no longer access.”
Stable coin vs Bitcoin
Stable coins are issued by crypto exchanges and have the option of being backed by fiat money like the USD on a 1:1 ratio. Other backing options could occur with cryptocurrency to keep transactions decentralized.
Speculating is dangerous
Cryptocurrency is not a “get rich quick scheme”. Research a coin before you invest in it.
Alain Aoun, Co-Founder of Blockhain leader, told AMEinfo: “There is definitely a potential to make a profit off crypto trading but people should be aware not to fall victim to the hype surrounding every cryptocurrency-bubble and not to be captured by FOMO (fear of missing out), buying massively at the peak of a bubble, hoping to make quick money.”
But do take reasonable action as it will result in experience, and experience will result in better decision making.
Christopher Flinos, Co-Founder HAYVN, told AMEinfo:
Crypto is the future of money
“If the Internet, born from Netscape in 1994 led us to where we are today, imagine what this simple code called Bitcoin could do for global commerce. We believe digital currencies and blockchain are the future of finance, and their use will soon become as ubiquitous as email.
Meanwhile Facebook has announced Libra and JPMorgan, its own stablecoin to use in cross-border payments and settlements enabling faster, lower-cost transactions.”
Crypto is illiquid
Buying more than US$20,000 worth of crypto means you should trade on an OTC platform not on an exchange.
For investors wanting to buy larger amounts of BTC, your total cost trading on an exchange will end up between 5% – 9%. Most of these costs will be hidden and you will be under the illusion that you are trading commission free.
Buying OTC puts you in greater control of your costs. HAYVN for example, offers the world’s first online OTC brokerage service with no hidden fees or spreads.
Beware of too good to be true promos
Alain Aoun, Co-Founder of Blockhain leaders, told AMEinfo: “Scammers take advantage of traders’ greed and ignorance. While many ICOs are legitimate, the vast majority has no real business plan or technology behind them. Investors should tread carefully, and read the whitepaper of any ICO prior to investing money in it.
Investors should be wary of too-good-to-be-true promotions and promises of quick riches. Many cryptocurrency brokers and exchange firms can charge you enormous commissions or make it difficult to withdraw the funds once you deposit money. If it is just too good to be true, don’t invest in it.”
Ihab Al Yaman, Managing Director, Memob, said: “Blockchain protocols are built to ensure a level of security and prevent tampering like never before. The key is how to secure the part that is not on the blockchain.”
Safely purchase and store, and know adoption cycle
Jay Blaskey, head of sales at BitIRA told AMEinfo: “Everyone should know (1) how to safely purchase crypto, (2) how to safely store and (3) at what stage in the adoption cycle this technology currently is.
“These are listed in order of importance because you should not be buying anything unless you can safely purchase and store your assets. Once you have that understood, you can take a deeper dive into how little we have so far exploited this technology, because the best is yet to come.”
Julien Hawari, CEO – InfakCorp – The first Islamic Fintech Ecosystem, Advisor – Capital Crypto Bank – Crypto Advisory Firm, said: The core of the blockchain/crypto world is about the security it provides. Falsifying ledgers is nearly impossible or at such an enormous cost that it makes it impossible. The security issues that made news headlines had been on existing tech that were not properly protected/siloed.
Crypto a hedge against economic downturn
Ahmed Jacob, Dubai-based Managing Partner and CTO of INVAO told AMEinfo“Crypto assets are an ideal tool for portfolio diversification. They are non-correlated to every traditional asset class, meaning if other asset classes – for example stocks, bonds, real estate or precious metals – lose their value, crypto assets will not be affected by this market downturn. This feature makes crypto an ideal hedge against an economic crisis because crypto returns are not affected by the same metrics of other asset classes.”
Crypto outperforms other assets
Crypto assets have outperformed every other asset class over the last five years in terms of their risk-adjusted returns. Although this asset class is more volatile than other asset classes, an investment of $450,000 in Bitcoin five years ago would today be worth more than $10 million. Crypto investors should get into the asset class for the long haul. Some experts suggest the price of Bitcoin could go up from currently $10,000 to $100,000 within the next two years.