It’s volatile, controversial…and one of the hottest topics in the investment sphere in the last several years. We’re talking about cryptocurrency, of course; the digital coins that promise to revolutionize how we conduct business. But is there really something driving Bitcoin, or is it all just hype?
What’s Cryptocurrency All About?
First, let’s pin-down what it is we’re discussing here. It’s important to know that Bitcoin is a cryptocurrency, but not all cryptocurrencies are Bitcoin. In fact, there are hundreds of upstart coins out there, including Ethereum, Neo, Komodo, Ripple, and many more.
What unites them is that they are all decentralized, digital currencies. Some coins have different goals, like simplifying bank transactions, enabling faster P2P payments, or monetizing digital assets, but all are fundamentally a digital method of storing and exchanging value.
Second, the prices of all these different coins relative to dollars tend to be highly volatile. Bitcoin has been around since 2009, but it became a global investment phenomenon in 2017 when prices surged from $1,000 to $20,000 per coin. Of course, they plummeted nearly 50% from that all-time high in a matter of weeks as well.
Fear is a Four-Letter Word
As Gary Cardone explains, fear is a great motivator, and that’s certainly true with cryptocurrency. Fear is what causes much of that volatility we in prices.
First is the fear of missing out, or FOMO, as it’s commonly known. No one wants to be in the same spot this time next year, kicking themselves when Bitcoin hits $100,000, as some experts predict. That attracts a lot of unseasoned, novice investors hoping to strike it rich quick. But fear also plays in a different way as new investors, especially those with limited funds, tend to be quick to sell, which is precisely what causes the volatility.
There’s also the problem that no one knows exactly where this is all headed. As mentioned above, some experts predict Bitcoin to command prices of $100,000 or more by 2019. Others say that it’s just a commodity that will only end in disaster.
The Technology is the Key
The only real answers we have are in the blockchain technology that powers cryptocurrencies. Blockchain is the intrinsic value in a cryptocurrency, and it has the power to make serious changes in many industries like banking, government, medicine, retail, cybersecurity, and much more.
Each coin’s value is attached to the speed, versatility, and adaptability of its technology, which is information that should be laid-out in a whitepaper available to potential investors. If the blockchain works efficiently, and provides a valuable service, the coin might actually go somewhere.
Either way, it’s a risky prospect. Tha’s why—if you plan to invest in cryptocurrency—there are two key rules to follow:
- Don’t invest anything you’re not willing to lose. Any coin you invest in may skyrocket to the moon…or it may drop to zero. So never invest more than you can afford to lose.
- Leave day trading to the day traders. Professional traders are glued to their computers all day, following market trends and making trades. Don’t try to emulate them if you don’t know what you’re doing.
We can’t say that you should or should not invest in this market. You could see exponential returns on your investment, or you might see it drop to zero. It’s all a matter of what you’re comfortable risking, and how long you’re willing to hold before an investment pays off. But remember: nothing ventured, nothing gained.