#1 Cryptocurrency Investment Strategy For 2018: Is Diversification Key?
Cryptocurrency Diversification Investment Strategies
Welcome to the new year. You may have noticed Bitcoin’s extraordinary take-off last year, during which a majority of cryptocurrencies experienced huge gains. What does 2018 have in store for Bitcoin and all of the other cryptocurrencies? You’re soon to learn why things might not happen as you would expect. Let’s dive into the year of the AltCoins and see how a lot of coins other than Bitcoin will take the spotlight.
Last Year Brought Attention To AltCoins
An altcoin is any coin that’s not Bitcoin. It’s quite simple. They have this name because, for the longest coin, it was Bitcoin that took all of the media’s attention. Now, Bitcoin is being challenged by many other smaller coins who boast impressive scale-ability enhancements over the brand name coin.
In the year 2017, if you were to invest a mere $10 in each of the top 100 cryptocurrencies, you would have experienced an incredible 50x return on investment! That’s right – your $1000 investment would have turned into over $50,000. All by diversifying your investments.
This fast has brought so much attention to altcoins, and it’s coming to be that a coin will go up in value simply because it’s on the market. So many new investors want to get in on the ground level, so they’ll pump impressive funds into initial coin offerings (ICOs) with the hopes of literally getting rich overnight. For many investors, this actually comes true. A coin will take off after releasing to the public and early investors are rewarded greatly.
This Party Cannot Go On Forever
If everyone expects to get rich from a coin, the price will drive up. This is called a “pump”. Once the coin reaches a certain value – anywhere from 3 to 20 times over its original cost – then people will sell off in troves. This is called a “dump”. These pumps and dumps are heavily frowned upon in the world of Wall Street – in fact they are quite illegal – yet they are so prevalent in the unregulated world of cryptocurrency.
Sooner or later, people will become wary of these. Are investors putting their money into the hopes and dreams of a coin’s technological future, or are they putting their money into the hopes of getting rich?
Many compare cryptocurrency to the Dot Com Bubble, and they very well may be right. There might come a time – even if it’s not this year – where there is significantly lessened interest in cryptocurrency as a whole.
When too many people pump and dump these coins over and over, they lose their power. For example, if a coin goes up and down so much, then fewer investors are likely to hop on board once it starts to go up again. They might think, “This coin goes up, but it always comes down. I’m not going to risk it by investing.” This is actually harmful to a coin when it skyrockets and crashes, and this is why you should be wary in 2018 where you put your money.
A Healthy, Regulated Economy
2018 might bring more regulation to the table, ensuring the protection and well-being of its investors. For example, a major online exchange recently announced that it would not allow new members unless they deposit $10,000 as a deposit.
Why is this kind of regulation healthy for the cryptocurrency economy? Because anyone with the funds to meet this entry requirement will not be so likely to willingly take part in these repeated pumps and subsequent dumps. While this kind of regulation might seem too restrictive, changes like these are necessary for the healthy future of a coin.
Looking Forward To The Future – Technology
Sure, it is very exciting to see those sharp price increases and imagine getting in on the ground level of next month’s coin in the spotlight, eventually the world must pay attention to the actual technology in any given coin. Investors will start asking more and more, “Sure this coin has a high market cap, but what does it promise to the future?”
The aspect that makes a coin unique apart from the others is known as its value proposition. A coin must have a value proposition that either enhances or adds on to Bitcoin’s limitations. For example, Bitcoin only allows for 7 transactions per second, whereas some of the newer coins allow for thousands or more transactions per second. This results in not only faster transfer speeds but cheaper fees as well.
Other coins might embrace niche aspects such as entertainment, bill paying, security, and other aspects of decentralization. For example, consider DentaCoin that is the dental world’s first cryptocurrency enhancement. This coin does not vow to be the next Bitcoin; it simply wants to be widely used in the world of dentistry. The coin Ripple wants to be used by banks opposed to competing against them. The coin SunContract eliminates the middleman between providing and purchasing solar energy, which increases what homeowners earn from their solar panels. These kind of niche applications allow various industries to take advantage of the powers of cryptocurrency in very specific areas.
In the year 2018, we’ll see these aspects and more flourish. Imagine all of the industries in the world and imagine if each industry had a cryptocurrency backing it. Bitcoin is a very generic coin used in anonymous wealth transfer. We’ll see fewer of these generic coins come to exist; we’ll start to see very creative and ingenious applications of specific technology in very specific industries.
#1 Crypto Investment Strategy For 2018 Conclusion
Lose the thirst for wealth and riches. Instead, pay attention to how and why the future might embrace any given cryptocurrency. Invest not based on greed but based on innovation. By doing so, 2018 might be that might a greater year for you.