Due to my previous post on How to mine Ethereum, I’ve been receiving numerous requests to write about why, what and how to invest in crypto currencies. There’s a lot to talk about so let’s dive right in!
Why
It’s no secret that cryptocurrencies (and blockchain) is one of the hottest topics in 2017-2018. There are many great articles explaining why to invest in them, so I’ll keep this part short.
Today, the process of moving money across businesses, customers, governments works through a number of intermediaries and middlemen. Bitcoin came about as a means to cut the middleman by creating a new currency which didn’t involve any monetary institutions and avoid the unnecessary interchange fees. So the Bitcoin architecture (blockchain) and “altcoins” (Bitcoin alternatives), can disrupt many of these intermediaries and act as a layer similar to the central banks — which addresses the big headache of not holding any liabilities.
The general view on Wall Street is that the crypto market as a whole is significantly overvalued, with many arguing that bitcoin has no intrinsic value and thus cannot be evaluated.
However, there have been many signs lately of legitimacy, that signal a positive growth in the upcoming year.
For example, The launching of bitcoin futures on CBOE and CME (and Nasdaq later this year) has been considered as a major achievement in bringing cryptocurrency to the mainstream. This will allow investors to have plenty of options to bet on bitcoin using more traditional financial vehicles.
In addition, China’s largest Bitcoin exchange (prior to the cryptocurrency trading ban imposed by the local government) is reallocating to Japan and South Korea, the second largest cryptocurrency market in the world. The emergence of large-scale cryptocurrency exchanges will lead to an exponential growth rate of local cryptocurrency markets in both Japan and South Korea.
Nonetheless, one of the biggest names in Silicon Valley, Peter Thiel, is placing a moonshot bet on cryptocurrency, by investing hundreds of millions of dollars. Cybersecurity legend John McAfee, has also predicted lately that Bitcoin might reach $500,000 by the end of 2020.
What
While Bitcoin is currently receiving most of the public’s attention, it has no underlining business model that drives it. Moreover, as the price of Bitcoin rises, so does the mining difficulty and therefore the reward miners receive. This means that it will take longer and become more expensive to make transactions using Bitcoin as the price rises, which makes it an unreliable asset.
Many however, see it as digital gold, since it’s a gateway to buying most of the alternative cryptocurrencies. To buy bitcoin, consider using Coinbase or xCoins.
Today, bitcoin accounts for less than 40% of the total market share for cryptocurrency, down from roughly 90% at the start of 2017.
Personally, I believe that cryptocurrencies must solve a problem and there needs to be an underling business model and clear vision, in order to succeed in the long term. Investors are beginning to understand that and are rapidly turning to altcoins (cryptocurrencies alternative to Bitcoin).
Here are five examples of highly successful altcoins to invest in:
Ripple
Ripple is currently the second largest cryptocurrency (after Bitcoin) in the world. It acts as a payment network, RippleNet, and a cryptocurrency, Ripple XRP. The platform makes it easy to transfer almost any currency to almost any other currency in the world in no longer than four seconds.
Currently, Ripple is focused on working with banks and other institutions in a bid to offer an efficient and cost-effective way of sending real-time payments around the world.
Using Ripple, if one wanted to transfer currency directly from China to the USA, they can trade CNY to XRP, (Ripples currency), and then send XRP to the recipient who will have an online Ripple wallet or a bank in the USA. From there, they can trade the XRP back into USD.
As you can see below, Ripple has surged by over 1,100% in just the last month!
Ripple price and market cap
Ethereum
Ethereum is currently the third largest cryptocurrency in the world. It is an open software platform that enables developers to build and deploy decentralized applications. The advantage of Ethereum over Bitcoin, is that it can support many different types of decentralized applications.
Ethereum is reportedly switching from a proof of work to a proof-of-stake framework later this year. The goal of this change is to reduce the electricity Ethereum requires to reach agreement on the state of transactions and contracts on the network. Take in mind, that this could lead to a significant increase in Ethereum price.
Ethereum has surged by over 11,000% in the last year alone.
Ethereum price and market cap
Cardano
Cardano has a smaller profile than the more prominent altcoins, but its recent acceleration suggests investors are beginning to notice its unique value proposition. The platform seeks to deliver a more advanced smart contract by prioritizing scientific research and development. It is currently the only crypto currency using a proof of stake algorithm validated by the academic community.
Though appearing novel, Cardano has actually been around for a few years. It was created by Charles Hoskinson, a co-founder of Ethereum. It’s therefore little surprise that the platform’s proof of stake algorithm — called Ouroboros — is attempting to go above and beyond ether.
Since Novemeber 2017, the price has grown by over 400% and is estimated to double that this year.
Cardano price and market cap
Tron
TRON focuses on building a platform that allows digital content creators to cut out third-party intermediaries like the Apple Store and Google Play. This will ultimately help content creators get paid directly from their users.
The CEO and Founder of TRON is Justin Sun, who is often referred to as “the next Jack Ma”, the founder of Chinese eCommerce empire Alibaba.
The TRON team also counts Lucien Chen, a big data expert from Tencent and Alibaba. Chen recently announced he’s bringing a chunk of the Alibaba tech team including some top developers to work at TRON.
Not surprisingly, TRON has grown by 4,000% in the last month alone!
Tron price and market cap
Dash
Dash is a cryptocurrency alternative to Bitcoin. Its proprietary technologies InstantSend and PrivateSend allow the users to send transactions in a very quick and absolutely anonymous manner, respectively. This is a stark contrast to Bitcoin, whose network can take anywhere from 10 minutes to several hours to confirm a transaction.
Another major feature is an autonomous governance system, which allows the Dash network to allocate resources for the development and marketing of the coin by voting on proposals. A proposal can be created and introduced to the network by any person.
As seen below, Dash is on its way to new highs and has already grown by over 300% in the last few months.
Dash price and market cap
There are more great examples of use cases for digital assets like Stellar, Litecoin, Iota, Po.et, Enjin and more.
To purchase these altcoins, I highly recommend using the exchange Binance due to its variety of tokens, security and is currently the last of few legitimate exchanges to accept new registrations.
How
First, you’ll need to buy Bitcoin. Once you own Bitcoin, you can then purchase altcoins in exchange for it with one of many exchanges.
It’s important to pick a well known exchange by its security, user experience, variety of altcoins, speed and reliability.
There have been some cases of hacks to unsecured exchanges which led to millions of stolen Bitcoins.
Make sure to add a second layer verification to your logins such as SMS verification or Google Authenticator. This will increase your security by forcing to log in with your phone, and not just with a regular password.
Due to the overwhelming surge in popularity, some exchanges have temporarily suspended new user registrations to allow for an infrastructure upgrade. Here are some popular and highly recommended exchanges:
Binance
Coinbase
xCoins
CEX (temporarily disabled registrations)
Bitfinex (temporarily disabled registrations)
Despite being very tempting to get into daily trading due to the constant highs and lows of coin prices, I due warn you — if you don’t have professional trading experience, stick to HODLing (Hold on for dear life).
This is definetely an era that will be marked in history. It’s a perfect study case of FOMO (fear of missing out), as many want in on the insane profit gains. With bitcoin prices reaching unheard of levels, the fear of missing out is proving too strong to resist.
I believe that we’re only getting started, but there’s still a long journey of highs and lows ahead of us. If you’re interested in investing in this space, I recommend you do the following:
Never invest (trade with) money you can’t afford to comfortably lose.
Never FOMO.
Always do your own research and due diligence before placing a trade.
Feel free to leave a comment with any unanswered questions you might have!
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Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies.