A Non-Expert Look at Cryptocurrencies

The new year will bring in a lot of joy, excitement, and pain to a lot of people who are invested in cryptocurrencies. This is not an investment advice and I am not here to tell you which coin or token to buy nor is this an encouragement or solicitation to invest in cryptocurrencies. Some people have made good money investing in cryptocurrencies, some people got scammed, some people lost couple of hundreds of dollars, and some people have lost their life savings.

Why is there a lot of interest in cryptocurrencies? Volatility. With volatility, people can potentially make more money. Your $100 investment can potentially become $1,500 in just one week if you choose the right coin.

This is what I see from my corner of the world.

• Broadly, there are now two groups of investors: old investors and new investors (recently joined the last couple of months). Their objectives are very much different from each other. This month, a number of old investors cashed out some of their investments, which resulted in losses for some new investors.
• Investing in cryptocurrency is not for the fainthearted. This month alone, we saw the price of Bitcoin go up to $20,000 per coin and crash back down again to $11,000. You can check out coinmarketcap.com to learn more about the different coins and tokens that are available in the market.
• Throughout the years, a lot of cryptocurrencies (Bitcoin, Ethereum, Tether, etc.) have been stolen by hackers. Why? It's unregulated, so nobody will come after them.
• There are a lot of scam coins out there (Credence, C47, etc.). If the coin doesn't even have a decent website and social media presence, then that should already be a red flag.
• Institutional money (futures exchange) recently joined, so you have a lot of bright people with lots of pooled money trying to predict and influence the movement of Bitcoin. Some of them want it to go up and some of them want it to go down. At the end of the day, only one will win.
• Some people think that the value of Bitcoin is zero. Yes, ZERO.
• It has been a decade now and it will be nice to see real-word applications for blockchain (technology used by cryptocurrencies).
• Some coins can be mined. If you are planning on doing virtual mining, do your homework to see if you will make money out of it because mining coins is electricity and computing intensive.
• The strategy of some investors is to invest in ICOs (Initial Coin Offering). Buy them at low prices, wait for it to be traded in exchanges and for the price to pick-up, then dump the coin. Some investors do hold for the long-term, especially if they believe in the coin.
• Since cryptocurrencies are not regulated, there are a number of organized groups that does pump-and-dump. These groups of people will try to encourage people (mostly noobs or newbies) to buy a certain coin and once it hits the desired price point, then they start dumping them leaving the other unsuspecting investors with worthless coins.
• A lot of people give free advice in exchange market chat rooms. Some of them are good and most of them are bad.
• Choose wisely the market exchange you are going to use. Some have reported issues when they tried to withdraw their money and some have lost coins.
• Some investors use multiple exchanges to exploit the price variance in different exchanges.
• When you have the Chinese and Koreans investing in the coin, there is a high probability that the price of the coin will go up.
• Lastly, based on my observation, in the next year or two, Bitcoin will not be anymore the number one coin the world.

These are the basic things that you need to know about cryptocurrencies.

Happy New Year!

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Disclaimer: This is a personal post of the author. The thoughts and opinions expressed here are his own and not those of his organization. Thank you to Louise Andrea Melquiades for editing my work.