This is a brief and opinionated rundown of things you should know before making this step.
The Market it is extremely volatile
When it comes to making an investment the very first thing you should know is what kind of place you are entering. This means you have to know about the market you’ll be investing, its behaviour and its quirks. Now, this is a crucial step and a rule of thumb for every kind of investment, from stocks to real estate, not just cryptocurrencies.
If you’ve been following Bitcoin for a bit, you’ve probably know that its price skyrocketed and just recently, it surpassed the $3,500 mark. Altcoins such as Etherium, Monero & Litecoin have seen a tremendous rise in the their price: they went from costing a few cents or dollars up to tens or hundreds of dollars within a few months. This led to huge returns for early adopters and holders that cashed out their assets. You could argue that this is because of an increase in their adoption, but the main reason behind it is the trust that people put on Bitcoin. While on the rise, it pulls everything up on its way.
Someone might say that volatility is a good thing. Think again.
While volatility opens up the door to great opportunities, it also paves the way with high risk options. Bitcoin and Etherium might look stable and safe, but considering the “pumps and dumps” that numerous altcoins have experienced so far, it’s more than clear that things are unpredictable. Even Bitcoin itself experienced a big drop around $1800 recently, but only to start rising again.
It’s been a crazy ride with ups and downs, but mostly ups so far. Just keep an eye on the market before making any moves.
It does not scale
I’m not referring to technical scaling problems here.
Some people, tend to think of cryptocurrencies as an alternative medium that will provide them some sort of economic freedom. Some of them advocate the benefits of cryptocurrencies over FIAT, but at the same time they’re after their FIAT price. I seen no freedom and independence in this.
There’s also a bit of contradiction when you start thinking of how the cryptocurrency ecosystem is built around traditional regulators and central authorities.
Just to give you an example: think about liquidating your crypto assets. When it comes to that, every tool you have at your disposal – and I mean everything – is linked to the authorities everyone is trying stay away from. Most of the exchanges require your identity or passport to activate your account, your transactions are being monitor and are subject to investigation if your government decides so and on top of that, you have to link your bank account in order to withdraw funds.
Yes, you read this right. Banks. Not to mention taxes.
Your profits from cryptos are translated into FIAT currency. Everyone is trying to stay away from the banks but at the same time are linking their bank account to their Coinbase wallet. To get more of that, most of us are “dying” to know if Bitcoin will surpass the $4,000 mark or not. I don’t think that everyone would be so hyped about cryptos if Bitcoin costed just a few cents.
Another inevitable thing that’s happening, is the amount of fees you get charged for making transactions. If you plan to invest significant amounts of money in cryptos, you have to consider the amount of fees you have to pay in order to exchange your FIAT with cryptos and vice versa.
Not sure if cryptos can scale as a stand-alone currency next to traditional FIAT currencies with all these going on.
The is no regulation
Cryptocurrency markets are not transparent.
People have invested tons of money to what turned out to be sketchy ICOs or “Pumps ’n’ Dumps”. There was no roadmap, no tech team, no support, no nothing behind these coins and everyone was sold just on the idea that this coin could be the next bit thing that could make them rich. It’s sad and the “community” should be pro-active to avoid cases like ChainCoin or
I’ve used the word “community” here, only because it’s frequently used in social media by people who want to describe other people that are into cryptocurrencies. Honestly, I don’t feel that it’s the right word.
Apart from a handful of people that speak their mind about cryptos and publicly share information about their investments, everyone else acts a bit sketchy. Social media, Reddit subforms and YouTube are full of people that promote Ponzi-like cryptocurrency companies that promise interest on interest for just a few hundreds of dollars. Compound interest. You should always keep in mind what they say about it:
Compound interest is the 8th Wonder of the World. He who understands it earns it, he who doesn't pays it!
This is where market regulation should kick in, but unfortunately there’s no such thing in the cryptocurrency market. People are allowed to promote whatever they want, leaving the end consumer exposed to high risk options and possible capital loss.
The decentralisation and absence of central authority is a double edged knife for cryptos. You have to do your homework before making a move.
Submitted August 14, 2017 at 10:44AM by picomentos