It is never too late to invest intelligently. Think about the famous Dot-Com Boom between the years 1995 and 2000. Speculative investment soared as the internet hit mainstream. This new technology became public and as these companies joined the stock markets investing in them became available to everyone.
We are within the years of blockchain and cryptocurrency renaisance and investors are purchasing cryptocurrency on speculative valuations.
Make sure to read the risks of investing in cryptocurrency. We explain that just as the Dot-Com Boom produced many businesses, which eventually died off, the businesses which created actual value became titans of industry. This has created wealth for their early investors and blockchain is no different.
The Greatest Chance of Profit
Buying any store-of-value at a low price and selling it at the highest possible price should be obvious. However, many fall for the trap of rushing profit by amateur trade strategies, emotional actions and poor timing.
Hold on for Dear Life (HODL)
There’s a reason HODL has become a famous term and adopted by cryptocurrency enthusiasts. As with the burst of the Dot-Com Bubble various innovators continued to grow and out-pace competitors. As value developed so did less volatile stock prices.
The earliest days of Crypto tokens has passed us by. However, surprises regularly occur as this newborn industry transitions to infancy.
For instance, we are now keen on new tokens being created solely to appeal to the publicity and eagerness of speculative investors. We are also seeing that investment-worthy blockchains prove real value and a team of dedicated people who constantly push to transform their industry.
These diamonds in the rough are worth researching, purchasing and HODLing. Once their value becomes mainstream your profits can be realized.
Initial Coin Offering (ICO)
When a new token comes to market a traditional announcement is for the founders to offer discounts to its first investors.
At first glance this appears to be an obvious opportunity. However, most government agencies overseeing securities and assets require certain parameters be met by each investor. Know Your Customer (KYC) and Anti-Money-Laundering (AML) are the most common roadblock to pass. During this process you will likely be simultaneously proving that you are an accredited investor. eg. a person whose net worth qualifies them to invest.
What defines one as an “Accredited Investor” depends mainly on government standards and will take some serious researching and work to confirm and qualify your finances.
Day Trading Cryptocurrency
Trading assets between short time periods for incremental gains requires time, patience and dedication. Consistent advice we found recommends planning at least 15 hours per week to this form of trading. We have also found that you can easily spend much more time than that researching, watching, executing and managing crypto assets.
There is also a learning curve which can be dangerous for beginners who are anxious to make trades. Understanding which exchange to trade which token at the right time are table stakes to success. But executing limit, bid, ask or market-priced actions incorrectly can cause catastrophic loses.
We recommend first experimenting with free crypto-trading simulator apps and completing a Udemy course before any monetary risk.
Taking Profit and Reinvestment
Before taking profit from gains made from any platform or even peer-to-peer transactions make sure to consider the general risks, legalities and tax implications.
When selling an alt-coin several exchanges convert its value to a default currency, often Bitcoin (BTC). This is important to note for several reasons. The first being that most cryptocurrencies have volatile value. Trading a your gains into any other token could mean that your profits are at risk of its value fluctuations. While all trades are susceptible to tax implications converting directly to US Dollars could be subject to immediate tax where when reinvesting cryptocurrency may not.
Some stocks and cryptocurrency coins pay small sums known as dividends to wallet balances. Investing in tokens that reward its holders this way is a strategy that many have made profitable. Research into which blockchains work like this is required and investing in their tokens should not be solely based on dividend reward.
The best part of dividend reward is that you can move your balance at any time. Whereas staking, a similar reward system, typically requires allocating a set amount for a lock-in period where you will not have access or control of your investment.
Stake Your Crypto Balances
We’ve previously discussed blockchain protocols and proof-of-stake (PoS) rewards. In fact Ethereum is famous for its move from PoW to PoS but there are several other blockchains that operate on this protocol. Again research is required to understand the value-add and team behind any crypto token before becoming part of it.
The technical aspects of how staking provides value to a blockchain can be complex but the major points include:
- A minimum balance
- That balance is used to determine validity, sometimes deciding which node will facilitate transactions
- A reward is given for this participation
Mining for profit was an early-adopters game. At this stage of mineable crypto tokens it has become far less lucrative and expensive to operate.
The basics include
- A blockchain needs compute power
- You provide that power with your own equipment and software setup (mining rig)
- As you provide compute power you are rewarded on par with your participation (typically called hash rate)
Operate a Blockchain Node
Some blockchains offer rewards for owners of nodes. Nodes facilitate compute power and decision making for a network and thus as trust is built and transactions increase the node is rewarded for its work.
Obviously some technical knowledge is required for most setups potentially including server expertise and power consumption. If you’re among the tech savvy this may be a perfect side-project that includes fulfilling challenges, community and financial rewards.