Bitcoin, Etherium, Litecoin, and a host of other digital coins are all the rage right now. As their value continues to increase, buying a single coin becomes expensive – too expensive for some people to afford. While many people buy fractional coins to get in on the action, the allure of whole coin purchases is too appealing to pass up. That’s when less expensive coins become more interesting – and when investors can get into trouble.
There are more than 2,000 digital coins in existence, with new ones arriving almost daily. These new entrants might look tempting and offer innovative components, but the reality is that many coins that exist today won’t be around in ten years. How can you tell which ones will survive?
Finding the next bitcoin is difficult, and there are as many opinions on the subject as people are offering them. Only one thing is certain in the world of digital currency – failure to do your homework before buying digital coins is a good way to lose the money invested in it.
An Initial Coin Offering (ICO) is a period when a company offers a new coin for sale to early investors. The money the company receives in exchange for the sale of the new coins will provide investment capital to fund operations. Investors hope to gain an increase in new coin price above the ICO price, and the company owners hope their new business is a success. The problem is that ICOs are mostly unregulated, and fraudsters can form a new ICO, take investors’ money, and disappear, leaving investors with nothing.
To avoid flushing a digital coin investment down the toilet, always verify the business behind the ICO venture before buying into it.
Who is part of the venture team? Are they well-known to you or complete strangers? Unless you’re familiar with the team involved in the new currency and trust them, don’t buy into the ICO. Wait until it becomes available for sale on an exchange like http://coinbase.com or http://bittrex.com before buying it.
One of the worst ways to become a digital coin investor is to buy into an ICO with an unproven team. Another bad way to buy digital coins is to buy little-known coins because they’re cheap.
Like penny stocks, thinly traded (low demand) penny coins can disappear overnight, eliminating your investment. Before buying a coin, make sure it’s in demand by investors and has a useful utility that can lead to future growth. I use http://coinmarketcap.com to research market cap (market value of outstanding coins) and volume (number of coins traded) to make purchase decisions, looking for both high value and high demand. Use whatever method works for you, but make sure to do your research before buying anything. It could be the difference between buying the next Bitcoin and going broke.
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