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3 Things to Consider Before Jumping Into the Cryptocurrency Game

Investing in cryptocurrencies and ICOs 2018

3 Important Facts About Cryptocurrencies

The cryptocurrency market is booming. The number of digital currencies is growing exponentially each month. At the highest point this summer the net market cap reached nearly 200 billion dollars.

Currently Bitcoin is on a tear past $7k, driven by positive news/rumors and hard forks which award Bitcoin holders a second coin allotment per the amount of Bitcoin held each time.

The good news is that the train has hardly left the station yet.

Bitcoin will likely correct over the next few weeks which will create a great buying opportunity and cryptocurrency as a whole has hardly scratched the surface of potential mainstream user adoption. Once user adoption begins to open up more, market cap could rise exponentially.

I got in touch with Thomas Carter the CEO of DealBox, a blockchain venture accelerator and tokenized crowdfunding platform to learn more about how beginners should approach cryptocurrency.

Here’s the inside scoop.

Volatility

Carter clued me into the following –

The large price swings cryptocurrencies experience are a double-edged sword. On the one hand you have a potential for a large upside increase and conversely the same is true for a downtrend.

The volatility is due in large part to the newness of the technology which inspires both over-zealous confidence otherwise known as FOMO (fear of missing out) as well as hand-wringing doubt more commonly known as FUD (fear, uncertainty and doubt).

Combine that with a market comprised of early adopters with only a few professional traders and you get the current topsy-turvy playing field.

Security

I asked Thomas about some of the stories we’ve all heard about various hacking occurrences within the crypto space and what the takeaway from that should be for a person getting interested in cryptocurrency….

New technology coupled with massive amounts of money creates a prime target for hackers. The situation is much like the early days of e-commerce.

Hackers were able to exploit unforeseen holes in emerging technology platforms that powered the first online credit card payment systems.

Of course as the technology progressed the holes were covered with band-aid and today for the most part we feel safe about putting our credit card data into a web-based form and clicking the buy button.

Blockchain technology solves too many problems too elegantly to be discarded at the time of writing. The genie is out of the bottle and as this technology matures digital security will improve.

In the meantime it’s imperative that people do their due-diligence into best practices on storing and using the number of wallets available for storing and using cryptocurrency.

ICOs/Token Sales

Of course if we are talking about cryptocurrency we need to talk about ICOs. So far I had insight from Thomas on trading cryptocurrencies on exchanges such as Bittrex, Poliniex, etc. I also asked him about participating in an ICO (Initial Coin Offering) or TGE (Token Generation Event) –

In simple terms, an ICO is a new way of funding startups through issuance of digital tokens. The tokens issued are not like stocks in that they usually do not confer equity or rights but access to the underlying blockchain-based software that the startup is building their business model on.

A recent report from VC Mangrove shows an average return across 204 ICOs as a staggering 1,320%

Ironically another recent report shows that only 1 in 10 tokens issued over the past year or so is actually deployed and is in use as specified in the corresponding white papers for these sales.  

We’ve also seen two of the largest ICOs; Tezos and Bancor experiencing significant problems in their respective business models.

Regarding token sales, Thomas Carter said:

“As a passionate evangelist for the underlying philosophy and technical problem-solving capability of blockchain technology I believe the current lack of qualified 3rd-party vetting and due-diligence for a large majority of ICOs to date is a huge problem.

It’s a problem for the people who are funding the ICOs, it’s a problem for the crypto-community as the path we are on is asking for the SEC to step in and regulate and it’s a problem for the goal of promoting widespread adoption of blockchain tech and cryptocurrency in general.

This is the fundamental reason I created the DealBox platform. Participating in the funding of a blockchain project shouldn’t be so risky and difficult.”

There are tried and true methods of vetting any early-stage venture and ascertaining it’s true value and potential.

Having reasoned analysis and access to due-diligence data gives funding participants surety and satisfies a prudent approach, which invites self-regulation rather than outside regulation. 

At the same time it promotes funding of solid blockchain projects worthy of funding, projects likely go on to solve real problems and add value.

Cryptocurrency and Blockchain technology seems to be in a huge growth phase at the time of writing. Like previous technology booms there will be huge successes and huge losses. Luckily there are people and organisations providing a safer way for people to take advantage of the potential blockchain brings in a safer and more prudent fashion.

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