If you’d spent just over 1 USD to buy 33 Bitcoins in 2010, you’d be a millionaire right now. That’s the question that’s foremost on everyone’s mind: “Why didn’t I see this coming?”
But let bygones be bygones, and focus on your attention on the questions you should be asking yourself right now, as the cryptocurrency market has altered and matured immensely since it took off at the start of the decade. What was once an environment of people simply making casual investments in a property that showed no signs of profit has now turned into a genocidal free-for-all that is only growing by the day.
How do you break into that without getting whipped, scarred and sent back with you tails between your legs? Investing in cryptocurrency now is a far more daunting prospect than it was when people only invested in it for the novelty. Technology has changed, genuine use-cases have arrived, some governments have authorized its usage and most importantly, there is a lively ecosystem of cryptocurrencies and users, with the former numbering in thousands and the latter in millions.
Yet, you will have to move downstream at some point. It is better to do it now than later, when the water turns rougher. You will need to be prepared before you invest in a wildly unpredictable, yet inevitably arriving, economic future.
That’s what we’re here to help you with. Ask yourself these 7 questions before you join the cryptocurrency train:
Will Blockchain See Wide-scale Commercial & Government Adoption?
The question here is not if, but when. The benefits of cryptocurrency are simply far too tangible for it to be ignored long. Security, democratization, lowered transaction fees, global coverage – the list goes on. What’s standing between a worldwide renaissance and today’s current economic system is a hesitancy on the part of governments and disagreements between various formal institutions on how to incorporate it. That’s understandable, given that unregulated currency often finds itself in criminal hands. However, the dominoes are already toppling, as numerous countries have either approved cryptocurrency as legal tender or are expected to do so.
There are also certain cryptocurrencies that benefit banks and other financial institutions directly. Another obstacle here is a lack of genuine use-cases for cryptocurrency. This too is changing, as Microsoft, Newegg and numerous stores across the world are beginning to accept it as a form of payment.
It’s still early days, but as different cryptocurrencies with different use-cases and technology appear, and as governments get down to creating legal frameworks for it, blockchain will see rapid adoption in multiple industries.
The Markets Fluctuate Wildly. Why Invest Then?
This is the nature of the cryptocurrency market and speaking frankly, it isn’t for the faint of heart. You should note that the news of “bubbles” that you’ve been hearing lately are not new to investment. The dotcom and the famous tulip bubbles are no different. There are two reasons why there is so much fear being generated about cryptocurrency now.
Yes, Bitcoin may indeed be in a bubble. What has caused to rise in value so quickly is the fact that it so much simpler to invest in bitcoin now, in a day and age where technology gives so much power, than it was back in the 90s for the stock market. It’s just that more people know about it and it’s easier to begin investing. Secondly, word spreads fast in the age of Twitter and psychology is an important factor in investing.
A look at Bitcoin’s price chart is a look at a particularly irregular mountain line. Yes, prices drop many hundreds – even thousands – in a matter of hours. Unfortunately, when investment is so open and easy, that is expected.
In fact, the only predictable thing about cryptocurrency is its unpredictability. But, as we strongly believe, while there may be several nausea-inducing drops downs, the general trajectory is upwards. The questions are: how smartly can you invest, keeping your investment profile in mind, and can you stomach a few bad episodes?
How Will Governments React To Cryptocurrency?
This may be cryptocurrencies biggest obstacle. Governments have ultimate power when it comes to deciding how the world operates, of course. And they don’t like it when that power is taken away from them. Economy is a major aspect of government and blockchain has the potential to completely disrupt it.
However, they do make a few good points about the reining in of cryptocurrency. Digital currency has long been the haven for criminal activity and there have been more than a few shady ICOs (More on that later). The good news is that some countries have already recognized Bitcoin as legal tender and other countries are working to do so.
However, the general consensus is that it will eventually be recognized by most countries by the mid or late 2020s. This will be due to the fact that cryptocurrencies have enormous world-changing power and that governments will have no choice but to back the will of the people.
Is It Safe?
This one is up in the air. Yes, it is more or less safe. In fact, you couldn’t say that it is any less safe than credit cards or traditional forms of money. Cryptocurrency developers are constantly making security improvements to their blockchains. In the same way that banks have improved their security systems over the decades, so will blockchains. It’s still early days however and developers are learning.
Can Miners Take Over How They Mint Coins?
Ah, yes. This is the infamous 51% coup. If you don’t know, miners are those actually carry out the computational activities to solve the mathematical problems that create the next block on the blockchain. In theory, it is possible for miners to do so and block new transactions from being carried out. In such a scenario, they can reap all of the rewards from mining and block other users’ activity.
While this has happened before, it is an unlikely outcome. Some cryptocurrencies, like Zcoin, use different algorithms to prevent miners from ever having so much power. Others are investigating different methods to prevent this from happening.
You needn’t worry too much about this.
What Are ICOs And Are They Scammy?
Initial Coin Offerings (ICOs) are when companies initially offer their coins to the public The funds they receive from this are used capital to run their business. It is not very much different from IPOs. It’s quite obvious though that this can be used as an incredibly shady tactic to get money.
In fact, there has been some regulation in the USA about celebrities endorsing ICOs, given how prone to fraud they are.
There are some who are clearly running scam, but it’s your job as an investor to do due research, just as you would if some company ran an IPO tomorrow. Look at the technology behind the currency, analyse their work and their goals, do a background check on the team and think for yourself whether their currency is going to make it or not.
Are There Any Real Uses To Cryptocurrencies?
Bingo. This is where cryptocurrency really shines, and is probably one of the significant growth drivers.
There’s a vast range of cryptocurrencies running Decentralized Application platforms that allow individuals and business to build their software for some set purpose. The tokens that keep this economy going are the cryptocurrencies themselves.
Take for example, Golem.network. They offer users cryptocurrency for providing their computer resources to the anyone on the network. Essentially, they are building a peer-based supercomputer. TrustCoin does the same, but with a focus on ROSCAs, and can help people finance their lives.
Our world seems to be moving into an economy where money is not defined by region, but by its use-case. The potential for uses of cryptocurrency are limitless and there isn’t a day that goes by that a company hasn’t discovered a truly compelling use for it.
This guide is but just the beginning in the quest to understand cryptocurrency and profit from it. We recommend diving headfirst into websites, blogs and forums. You’ll slowly pick up the pace and be able to tell technological differences like a pro. Learn, invest, profit, repeat.