Key factors to consider when evaluating a Crypto/Blockchain investment

This is a contributed article from Reece Hobson, Group Sales Manager at Quantatex

When cryptocurrencies are discussed in the media, the most common remarks centre around the irregularity and unpredictability of the market, which can discourage a large amount of people from taking the leap and investing in this ever-growing marketplace. Unpredictability of the crypto market is undeniable but this should not deter anyone considering investment. In fact, many of the risks associated with cryptocurrency and blockchain are also present in traditional investments. Whilst you should always seek advice from your financial advisor before making any new  investments, considering the points below, can help shed further light on any possible crypto investments you are looking to make..

Evaluate the risk with research

There is always going to be a level risk associated with any investment – whether this is a more traditional example of stocks and shares or newer forms of investments such as cryptocurrencies or blockchain technologies. There is arguably more risk attached to investment in cryptocurrencies and blockchain as they have minimal regulation, in comparison to established platforms, so any potential investor should arms themselves with as much information as possible.

This research can take time as many options are available that need to be weighed up; a vast amount of currencies, strategies and providers exist. For example, the risks involved differ between investing in altcoins and Initial Coin Offerings (ICO’s) and more mainstream coins, such as Bitcoin, Ripple and Ethereum. If you choose to invest in smaller altcoin or an ICO, there is more risk of the coin not becoming wide used and therefore making you less money. But, on the other hand, this could be a prime moment to secure the best returns if you catch a rising coin before it spikes in price. While Bitcoin is widely used, the price has fluctuated much more due to its prominence and those who have made money from this, invested a number of years ago. Through research, you can evaluate these risks and consider where you would like to place your investment and how risky you would like to be.

The more time you devote to research, the more informed you will be about the workings of the market. You can familiarise yourself with this environment through articles from experts, follow expert market influencers or make an initial smaller investment to test your proposed strategy.

Scam Spotting

There have been many cryptocurrency scams that have hit the news in recent months, with Action Fraud reporting losses of more than £2 million in June and July 2018. Investment scams are not a new occurrence, for example scams appear regularly that include Money Saving Expert founder Martin Lewis which claim to have an investment opportunity recommend by him including mortgages, energy and PPI reclaim. Avoiding crypto and blockchain scams requires the same guidance as avoiding any other investment scam – do your research. Often, if an investment opportunity seems to good to be true then it most likely is. If you are unsure on the legitimacy of the opportunity, either avoid it or seek further guidance on the appropriate action.

Long-term

Longevity is a crucial factor to consider when investing in cryptocurrencies and blockchain technology. Daily fluctuation in prices will occur, just as it does with stocks and shares, so to maximise the investment, it is best to view this in the long term rather than focus on the daily picture. It is more beneficial to start with a small investment and learn more about the market as opposed to entering the space, without research, and investing a large sum of money.

This is especially important with investments in blockchain technologies. These technologies are still are still developing and their uses are continually expanding so you many not see returns from the offset however they are poised to be influential for future generations so provide great long-term investment opportunities as many start-ups are emerging using these technologies.

Once an investment into cryptocurrency and emerging associated technologies is broken down, the process becomes much less daunting and ever-more accessible. The most important action to take when considering investing is to ensure you have done adequate research or if you are still unsure, seek expert guidance or a provider to manage your investment profile. And remember, always only invest an amount you are comfortable with and is within your means.

 

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