There has been a hue and cry regarding cryptocurrencies. For some it is a new concept and for others this has been here for quite some time now. It all started from a simple concept of a digital currency bitcoin. Unlike the bitcoin, technology enthusiasts were more interested in the underlying technology platform for the same- Blockchain.
Before reading ahead kindly do go through the concept of blockchain – both its advantages and disadvantages ( thoroughly believe nothing comes with 100% pros). Here is a possible link for the introduction:
So now getting back to trading.
Since bitcoin or any other cryptocurrency has no fundamentals , it is quite an impossible feat to get a 1 year or even a 6 month prediction of these currencies.These markets are currently driven on sentiments. If one is to look at the actual value of these coins, or even the value at launch ( IPO) ( ICO in crypto currency) one can derive the value as actual cost of mining a coin. This can be a base value to start with, but to get this value one will need to have a balance sheet and a profit and loss statement of the company/platform launching the coin. Technically in a normal stock market such information can be found in a red herring prospectus. A red herring prospectus gives an overall introduction of the company, the shareholders of the same alongside its previous performance , board of directors and also the future plans. The same is validated by a regulator before going public.
So what does one do if you don’t have a red herring prospectus and more importantly a regulator. Well, look at the information of the company you are investing into. Have your own red herring prospectus. If they say the office is located at an address and in case you are in and around that area, do visit them. Read about the use case of the coin, What exactly are their plans? Can this coin be a disruption? Is there a need of this coin? What is the core competency? What tie ups is the coin looking at? Who is the big daddy of the coin? Who is backing up the coin? Do your research. If you are on a crypto exchange and the coin is listed there, do observe its movements. Just because a coin costs a cent, need not necessarily the coin will be legit, or need not necessarily the coin will give you 2000% returns in a year.
Do not follow the bandwagon!! Yes you got it right, just because your friend is investing, do not invest for the sake of investment purpose. Investment takes research and time.
Do remove your principal amount as soon as possible. You can risk your profit money (do not get too attached to it, especially if it was just a gamble). It is a risky field you are entering where a regulator is not present, nor are there any limits to upside and downside of the coin price.
Finally do your own technical analysis. It ain’t difficult, all you need is patience and basic maths to get it right!
Cryptos are here to stay, you cannot ignore them!! And do not forget to pay your capital gains tax, at least as income from other sources till the government comes with a proper taxation system for these.
There are more than 1500 crypto currencies currently available in the market. Choose wisely!!