Investing in Cryptocurrency

With new investment possibilities cropping up every day, it is critical to keep up to date with what options you have for wealth management. As portfolios need to be balanced, good portfolios tend to include some riskier assets, such as cryptocurrency.

While investing in Cryptocurrency carries a higher risk but statistically, the returns are way much higher than the risk especially if the cryptocurrency is bought within a reasonable price range.

Cryptocurrency use cryptography to process transactions and create new coins. All transactions are stored on the Blockchain. This gives the ledger a data structure that is well insulated from hackers and can be copied to any computer. The use of cryptography also makes it very difficult to forge coins. Cryptocurrencies are very popular due to their decentralized nature. Many users believe this gives users protection from Government interference and manipulation. There is also the hope that cryptocurrency will help break the monopoly banks hold over currency.

People are attracted to Cryptocurrency due to many factors, among others:

1: Massive potential for returns.?

When we invest, we wish and aim for the highest possible return. Well, there is no higher return in any investment classes other than Cryptocurrency; nothing comes close as second-place in terms of returns. Of cause, higher return also means higher volatility; and higher volatility represents greater risk. Statistical analyses for the past few years have revealed that when a cryptocurrency lost its value, it usually loses around 2/3 to 3/4 from its previous record high. But remarkably, when it rebounds, it will go up tens of fold from its previous high. Based on these analyses and findings, it is safe to say that if one were to buy a Cryptocurrency off its peak or at a large discount from its previous peak price, there is a high probability that this investment may return a few folds.

2: Shorter price-cycle period

As a relatively new asset class, cryptocurrency attracts tens of thousands of new investors and users every single day. New blood brings new funds into this fastest growing asset class. Therefore, a cryptocurrency requires less time to rebound after a correction phase, usually within months, compared to other asset classes such as stocks, commodity and fiat currency, which could take years to recuperate. Investors know it is likely that they can begin cashing out their investments rather quickly.

3. Limited supply

Most cryptocurrency has a limited supply in circulation. As more and more businesses embrace Blockchain Technology, the demand for Cryptocurrency will increase. The increasing demand, along with limited supply, means prices can only go up.

The largest Cryptocurrency by market capitalization is none other than Bitcoin (XBT), follow by Ethereum (ETH) and Ripples (XRP). There are many other altcoins in the market and investors must understand the concept of the coin clearly before investing.

There are a few considerations before one decides to invest into a Cryptocurrency:

  1. Will there be limited/maximum supply in circulation?
  2. What is the objective of the coin?
  3. Is the coin usable on its own platform like Ether on Ethereum and Ripples or it’s just a pure coin as a medium of transaction such as Bitcoin & Litecoin?
  4. How many users will be using the platform/coin?
  5. Will the Blockchain platform that creates the coin be profitable in the long term?
  6. Track record/Historical price performance of the coin.

FOINS educates our members by highlighting the fundamental and concept of the Project, Platform and Coin, as well as the expected number of users. We believe that in order for a Cryptocurrency to be successful:

  • First, it must originate from a Blockchain Platform that has an attractive concept (proof of work).
  • Second, the overall financial capacity, plan and future as well as the foundations of the Platform the creates the Cryptocurrency must be strong; meaning it must be able to generate enough income in the long run based on its operational activities to serve and fulfill its purpose.
  • Lastly, it’s all about the number of users! If there aren’t enough users, even the best cryptocurrency will find it hard to appreciate in price. Cryptocurrency after all is like a commodity; it is a commodity by definition. When there is a good demand with limited supply, price will surge. Most cryptocurrency failed to reach its full potential due to lack of users. It is believed that 50,000 users is the magic number. Anything less reduce the chances of success and anything more is a guarantee of success.

In conclusion, investing in cryptocurrency is on an upward trend. This trend is set to continue at least for the next 3-5 years as more and more Financial Institution, Multi-National Corporations and Businesses are migrating into Blockchain Technology and embracing Blockchain Applications.

FOINS Education Concept discourages its members from investing more than 20% of their investment in Cryptocurrency. Even though the risks justify the returns at this point in time, there is no need to invest all your life-saving into a high-risk asset class. Diversification is the name of the game.

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