As of January 2018, there are over 1300 altcoins available, and definitely more ways to go wrong than right. Read these do's and don'ts before you invest.
Maybe you missed out on investing in bitcoin over the last few years.
Now you're thinking there's no way you'll get the 10000x returns the early bitcoin investors did.
Well, cryptocurrencies aren't all about bitcoin.
There are over 1500 other cryptocurrencies currently open to investors as of March 2018, and while bitcoin sits at the top, it's only worth around 40% of the total cryptocurrency market.
Meaning there's still a lot of opportunities for investors to make serious returns through altcoin investments if you know what to do.
And we're going to help you by listing 7 need to know tips for you to consider if you're thinking about investing in altcoins.
Profits Not Guaranteed :
It's important to make this absolutely clear from the outset. There are no guarantees that any investment in altcoins is going to land you a profit.
Don't let the 'to the moon' memes fool you.
Cryptocurrency can be like the wild west, especially the further down the market list you go.
That's not to say that there aren't good projects out there, but you should be very wary of any project that guarantees a return on your investment.
However, that doesn't mean there isn't room to make a profit, as the rest of this guide will explain!
Only Invest Money You're Prepared to Lose :
Given that profits aren't guaranteed, it's important to remember that every dollar you invest could be lost.
A project you invest in might end up being a scam. The technology might have a fatal security flaw, or it might just sink to the bottom without a trace because of poor publicity, or extensive competition.
Don't invest your life savings or remortgage your house to invest in any cryptocurrency, especially unproven projects with a low market cap.
Ensure that whatever you invest, it's an affordable amount for your own circumstances and be prepared to lose your money if a coin you invest in fails.
Beware FOMO and Coin Pumping :
Any sort of investment tends to generate greed, and greed can make people manipulative.
Unfortunately, this happens often in the cryptocurrency market.
Coins with no real value will be 'pumped' upwards, the FOMO (Fear of Missing Out) strikes hard, and people rush to buy. When the coin then rises sufficiently, the pumpers sell, and that forces the value down.
While it isn't always possible to avoid the 'buy the rumor, sell the news' trap, it's worth remembering. If a project with absolutely no real value is suddenly up 100x or more, it's probably a coin to avoid.
If you're a little confused by all the crypto acronyms and phrases, check out this cryptocurrency dictionary.
Due Diligence and ICOs :
If you're looking to invest in a project, you might get a bargain if you look into investing in Initial Coin Offerings, or ICOs.
They might involve an innovative use of the blockchain, or involve a well-known figure in the cryptocurrency space who can attract attention and investment.
But, as with existing altcoins, it's important to do your proper due diligence and research. ICOs may have a lot of hype and not much else, so watch out for red flags.
Understand any ICOs aims, look into who is involved, read the project white paper and think very carefully about whether it looks trustworthy. If you need help researching, the Top ICO List offers an updated list of coin offerings with information on potential strengths or concerns to consider.
Diversification and the Market Cap
It may seem tempting to go 'all in' on one project with a lot of hype, but you probably wouldn't do that with a traditional investment, so why do it with an altcoin?
Spreading your funds across several projects helps to cushion you against a coin that suddenly fails, or if the market moves against it.
There might not be much room in the top 10 coins for 10000x returns on your investment, but a project like Ethereum has more life in it than the #1500 coin in the market.
Your approach will depend on your appetite for risk. Invest in a few more proven projects like Ethereum, Ripple or Litecoin, and then invest in coins with a lower market cap and share of the overall cryptocurrency market.
Watch the Markets :
Volatility is part of the cryptocurrency experience, but it's important to look at the bigger picture.
There are almost two markets here, Bitcoin and altcoins. Traditional wisdom is that when Bitcoin goes up, altcoins go down and vice versa.
Traders will use the value of their Bitcoin holdings to trade altcoins and, once they've made a profit, move back into Bitcoin. News affecting a project - like a Bitcoin or Ethereum fork - can also spook the herd and encourage movement one way or another.
It's important to watch for these events and prepare for them, as you might be able to pick up altcoins at a discount compared to their 'true' value or sell for a greater profit.
Consider the HODL Approach :
While you can pay for everything from pizzas to your lawyer using bitcoins, there are fewer opportunities to spend your altcoins than you'd probably like, even in 2018.
It might mean that you have to hold on to your altcoin investments, but that isn't a bad idea if you've been burned trying to play the markets. The HODL approach lets you wait out any volatility and see where your investment ends up in a few months or years.
By investing in altcoin projects you believe in, you can see the results -- good or bad -- without dealing with the stress of the daily or hourly volatility, where a coin can drop 30% and then increase 300% in value.
Invest in Altcoins Sensibly :
You still have a strong chance of profitable investments in altcoins if you know where to look and what to invest in.
By having a cynical mind, doing your due diligence, and only investing funds that you'd be prepared to completely lose, you can prepare yourself mentally for the rollercoaster of volatility that altcoin investments provide.
Don't forget bitcoin, though. Hedging your bets with a small bitcoin holding can help to balance out any 'riskier' investments, at least by cryptocurrency standards.
If you've made a small fortune with cryptocurrencies already, why not invest that money into starting your own business?
Got your own altcoin experiences or tips to share? Leave us a comment below.
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