Cryptocurrencies from Bitcoin to its lesser-known cousins like Litecoin and Ethereum are among the most polarising technologies in history. Even as people are becoming increasingly aware of what they are and how they work, there's still a wide range of opinions about their long-term significance.
Some see them as the currency of the future. Others think they're just a fad. Whether you're looking to invest or just want to learn more about cryptocurrency markets, it's important to understand how these digital currencies operate. This post is designed with that goal in mind.
We'll look at 10 things you should know about cryptocurrencies before jumping into the market, based on my experience with these new types of money.
Use Cases Make a Huge Difference
You just learned the first three lessons on how to trade cryptocurrency. Now it's time to talk about some of the most important ones.
The first one is that use cases make a huge difference in how valuable a cryptocurrency is. The more use cases a cryptocurrency has, the more valuable it becomes, which attracts more users and allows for even more use cases.
You Can't Predict When the Bull Market Will End
The bull market will end when the market is overvalued, which means that the price of cryptocurrencies is higher than it should be given the underlying fundamentals of these digital assets. This can occur for a variety of reasons:
- There could be a global recession, which results in people selling their cryptocurrencies for more stable investments like gold and other commodities.
- The governments could start regulating cryptocurrencies harder than they have been recently. If this happens, fewer people would want to buy them and more people would want to sell them (since they're less likely to become profitable).
Financial Markets Take Time to Adjust
The financial markets are slow to respond to new information. There are many buyers and sellers, which means that every transaction has a long line of people waiting behind it. The market can only adjust as quickly as the slowest person in line decides to act on their information.
It's Hard to Find A Good ICO
If you’re interested in getting into the cryptocurrency space, I want to share some of my top learning outcomes from my time trading. There are a lot of great things about it, but there are also a few pitfalls that I want to make sure you avoid.
First, let's understand what an ICO is and how it works. An Initial Coin Offering (ICO) involves selling company tokens. The cryptocurrency can be used on their platform to raise money for development purposes or marketing campaigns. The tokens can then be traded on secondary markets like those offered by Binance or Kucoin.
Exchanges Are Complicated
If you're not a developer, or if you don't have access to someone who is, then understanding how exchanges work can be a challenge. The most popular ones Coinbase and Binance are both known for having poor customer service.
They're so large that their support teams are overworked and underpaid. On top of that, cryptocurrency exchanges are constantly being hacked or otherwise compromised.
There Are Still Good Investments
Cryptocurrency is a risky investment. Not all of them are scams, but they're all high-risk investments. This means that you should only invest in this space if you can afford to lose your money. If not, then stay away from it altogether.
If you're going to invest in cryptocurrency and other digital assets, then make sure that there's a good reason for doing so. It could be as simple as wanting more exposure to digital assets or it could be something more complex like wanting access to an asset class that won't be correlated with the rest of your portfolio (like traditional stocks or bonds). Investors nowadays can work with a digital asset bank offering a full spectrum in terms of custody, trading, lending, borrowing,and issuing needs.
Facebook Ads Can Drive User Acquisition
Facebook Ads can be a great way to drive user acquisition, sales, and website traffic. They’re also an effective way to promote your product without spending too much money. You must use the right ad targeting options and keywords so that your ads are only shown to people who are interested in what you have to offer.
Consensus Around the Baseline Technology
There are many ways in which cyber security and blockchain technology have come together, but it's important to note that we're still in the early stages of both.
The consensus around the baseline technology is hard to achieve when you consider that even something as fundamental as hashing (the process by which a string of data is converted into an encrypted form) is still evolving.
Blockchain Teams Have Insatiable Appetites for Capital
Blockchain companies have raised so much capital over the last few years that their appetite for new funding is insatiable. If you’re an investor and you don’t have a fund to invest in these companies, it can be hard to find places to put your money.
But this is good news for everyone involved. It means that
- Investors are getting rich from investment returns and salaries
- Employees get paid well
- The value of cryptocurrencies goes up because they perform better when there are more real-world use cases like buying coffee with Bitcoin or Ether (the token behind Ethereum).
You don’t want to miss out on any of these opportunities.
Be Humble and Be Ready for Black Swan Events!
You may have noticed that the cryptocurrency markets are volatile. The price of any given coin can change dramatically over a week and sometimes even in a day. This is why it's important to be humble when you're trading and know that there is no such thing as an investor who has all the answers or can predict every market movement with 100% accuracy.
Markets Growing Quickly
The cryptocurrency markets are growing quickly, and it's important to understand how they work. This guide will help you get started in trading cryptocurrencies, whether it's Bitcoin or any of the other major currencies out there.
Cryptocurrency markets are complicated and volatile, but they're also risky and unpredictable. It's what makes them exciting.
These learnings are not just for those in cryptocurrency, but for anyone investing, trading, or working in financial markets. We hope that the insights from this piece help all our readers with their investment endeavours, and we look forward to providing you with more educational content in the future!