With the advent of decentralized exchanges such as NXT and Counterparty, many new investments have become available, offering the potential for huge gains for the sophisticated investor. Unfortunately, though, with the potential for great returns you will inevitably have great risk. These assets are, by no means, exempt.
So, how do you determine which investments to commit your hard-earned money to? Below are some suggestions to consider when deciding how to invest:
1. You Can Verify the Real Identity of the Asset’s Creator
The Cryptocurrency industry is rife with potential investments offered by anonymous parties. While sometimes you can get lucky and make money from these investments, more than likely you will end up in the red. You need to keep in mind that the VAST majority of crypto-investments not only lose money for initial investors, but can even end up completely worthless. Without the accountability of having their good name on the line, asset creators have little incentive to both protect investors from loss and have every incentive to outright scam investors in many, completely untraceable ways.
2. Look For Lasting Value
Decentralized assets are, in many ways, very similar to penny stocks; they have very low liquidity and can fluctuate wildly in value. For this reason, it is important to pick only investments which can provide definite value. One way to do this is through dividend payouts.
The other is from investments that will provide long-term, growing value at a cheap price. Eventually, the market should correct to a fair price and you will make a profit. This is called value investing, an investment strategy that has been used to build some of the largest fortunes in the world today.
3. Minimize Risk by Diversifying
Lastly, it is important to diversify into several investments. That way, you can minimize your risk of loss from a single bad choice. This is especially important in the world of crypto, where investments can become completely worthless overnight.
By following these basic rules, you can significantly increase your chances of profitable crypto trading and blockchain technology.