CRYPTOCURRENCY TRADING & INVESTING STARTER GUIDE
Jim Barnish Jr.
Partnering with VCs to increase IRR ?? Helping founders find the best way to grow, profit & exit (with max value) & make fewer dumb mistakes in the process. Growth or get out.
In the world of altcoin, from Bitcoin to Ethereum, trading digital currency is on the rise with many not knowing the true in and outs of how it all really works (much less it's potential). Getting into all the details surrounding the technology can be quite confusing so let's stick to the trading and investing side, and if you're ready to invest or just need some additional resources, this is the article for you. Let's get started with the basics:
What is Crytocurrency?
In the most basic form, Cryptocurrency is money created from code and is often referred to as the internet of money. Just as money does, it has value, which can be exchanged for services or goods from those who choose to accept it. It is wise to gain a full understanding of the definition of crytocurrency:
"A cryptocurrency is a digital currency that is created and managed through the use of advanced encryption techniques known as cryptography."
It is more than just a mere exchange between one person to the next, for example, Ethereum which functions as a full platform, allows for applications and contacts to be implemented. Ether is the actual token that allows clients to execute requested operations. Each cryptocurrency has their own unique function that their specific currency has incentive for.
What is Cryptography?
Think of this as your private key for a password and only the holder of this key can access the data (i.e. the buyer of altcoins). Cryptography can be simplified by turning data into a format that is unreadable by the public and the only person who can decode it would be the key holder. However, if you lose this key you can never recover it and your funds are lost forever. In addition to proving the identity of transactions, cryptography is also the mathematical magic behind:
- Keeping the integrity of the ledger (blockchain)
- Authenticity of transactions
- Privacy of transactions
Why invest in Cryptocurrency?
As an emerging technology and asset class, there is so much growth happening that one should at least consider jumping in. The teams forming in this space make up some of the top talent with investment dollars flowing graciously. Here are 3 reasons worth considering:
- Growth: It has a high potential to disrupt a huge number of traditional industries in the market as a new asset class.
- Low competition: Professional hedge funds and sophisticated investors are still largely sidelined from investments due to illiquidity, market caps, regulatory uncertainty, and lack of know-how.
- Diversification: With a very low correlation to any other asset class, the risk as the markets mature looks to remain steady.
From a utility standpoint, most cryptocurrencies are far away from reaching main street adoption, and in some cases even proof of concept. But remember, markets feast on growth and like to price events far into the future.
The clear applications are not yet in front of our eyes, but from an early stage investment standpoint (hello risk), this is the time we want to be paying attention.
Why trade Cryptocurrency?
"Most of the investment rationale we just discussed apply directly to trading, but here are a couple of added insights:
- Opportunity: The volatility and day-to-day price fluctuations offer up some great opportunity for traders. Moves in this space, from a percentage basis, mirror that of options contracts.
- Lack of Professionals: Unlike the stock market, cryptocurrencies are not yet littered with high-frequency traders and sophisticated algorithms solving for every market inefficiency. Most skilled traders should find an increased edge here."
The explosion in popularity, along with market capitalization,has seen a totality of all coins go from 15 billion dollars at the start of 2017 to over 100 billion in just over 6 months. This exact type of magnitude is what presents significant risk and opportunity for investors and traders. For more information on where to buy, how to trade, and further resources, check out the full article from The Trade Risk, here, or watch their full guide here.
ABOUT THE AUTHOR:
Jim Barnish is a strategic change leader with over 15 years of global and integrated operations, sales, and marketing experience. Over the course of Jim’s career, he has successfully worked with companies undergoing accelerated business development, process improvement, change management and operational transformation initiatives.