Is It Still Worthwhile Investing In BTC, ETH & Other Cryptos?
Posted on 3. September 2018 | By admin
Several thousand percent return with BTC and Co ?! The hype surrounding Bitcoin, Ethereum and other cryptocurrencies is huge! Due to the gained attention, more and more people ask themselves whether it is even worth investing in cryptocurrencies. Or is it already too late? And what do you have to consider? Today we want to answer this question rationally.
Each one of us quickly gets a clue when you hear headlines like “A dropout with 12 years Bitcoins – today he’s a millionaire”. Many immediately start dreaming of a life of riches. And they are in danger of running into the network of so-called “scammers”.
These promise returns of 30% to 40% – per month of course. Of course, with zero risk. And without effort – that goes without saying.
Already all alarm bells should be ringing.
The 3 Types Of Bitcoin Investors – Lucky Knights, Believers And Traders
Bitcoin investors can roughly be divided into three categories:
The first category are those who want to make quick money. Quick in, quickly out again – with the greatest possible profit and tomorrow millionaire. We can also count the gamblers in that category, although this is a certain type of quick money seekers. Platforms like http://www.bitcoinesports.net/ are visited by people who want to make money without giving anything in return, or lets say – without particular knowledge or skills.
Then the Believers. These are the ones who really believe in bitcoins and the underlying blockchain technology. They usually have a long-term interest and want to keep their cryptocurrencies for many years.
The traders are the pros among the Bitcoin investors. They create liquidity in the market and are often able to influence prices.
Quick Money – the Vulnerable Group among Bitcoin Investors
Those who want to make quick money are the ones who end up losing the most money. Therefore, one should try to become a real investor if you want to earn money with cryptocurrencies. The investors of the group “Quick Money” are most likely to be carried away to hasty decisions.
Therefore, try to become a real investor, as a “Believer” or “Trader” to develop, because the newcomers, often engage in questionable investments. Also, you should not take single opinions in forums one to one. Note: You are still the best investment adviser yourself and should try to keep you informed independently and above all from different sources.
Emotional decisions are among the biggest enemies in investing. Always try to make rational decisions and do not let yourself be seduced by the dream of quick money.
Nobody can predict where the course will be tomorrow, the day after, or in a year. That would be like looking in a glass ball (which unfortunately does not exist). And no one can predict 100% exactly which cryptocurrency will perform best. Will only one, two or more survive in the end? Or maybe not at all?
Sure, bitcoins have the first mover advantage, which increases their chances of survival. But nobody knows exactly and all options remain open.
Children’s Shoes vs. Mass Market – Where Are Cryptocurrencies?
But where are we currently with the cryptocurrencies? Are they still in their infancy, or have they already reached the mass market? This can be explained very well with the concept of the “diffusion of innovation”, which means in German as much as “cycle of innovations”.
Diffusion Of Innovation Using The Example Of Apple
When Apple invented the iPhone, they were at the very beginning still the “Innovators”. Brand new on the market and the iPhone was something extra special.
The earliest buyers of the iPhone were the “early adopters,” who were already spending large sums like new technology like the iPhone. It is very similar with the televisions. There were also people who bought the first flat screens and spent a lot of money. The early adopters are the trailblazers and the customers.
The next step in the development is the “early majority”, the first mass in the market to buy a new product. In the more people are interested in the product, it is mass market suitable and you have to have, because it also has the neighbor.
Eventually comes the “peak” that the market saturation is reached and then the “Late Majority”, so the latecomers. The “laggards” in our mobile phone example would be those who still walk around with their old Nokia today.
And of course this principle can also be transferred to Bitcoin and other cryptocurrencies …
Right at the beginning of 2008/2009 came the first “innovators” who invented Bitcoin. Then came the “early adopters” who for the first time invested real money and for whom Bitcoin is also something ideological.
And now, bit by bit, the topic of bitcoin and cryptocurrency is slowly arriving at the masses. This is also recognizable by the increased coverage in the mass media.
For us, that means that bitcoins could get a huge boost. If Bitcoin & Co. succeed in establishing themselves on the mass market, the value of these cryptocurrencies will certainly increase again.
What Factors Speak For And Against Cryptocurrencies?
What Speaks For Cryptocurrencies:
- Security – in times of political uncertainty, many seek protection of their property. In China, this is often the case today when people try to extract their assets from the traditional monetary system.
- Growing globalization – globalization can make money traffic cheaper, faster and safer. The new cryptocurrencies can break old structures and make services better and processes easier. Above all, the cryptocurrency blockchain technology can be used for many applications.
- Alternative Crisis Currency – Cryptocurrencies can be established and used as alternative crisis currencies. So they can represent an alternative to gold or silver. The good thing is: the storage costs are much lower. There are other dangers for cryptocurrencies, such as hacker attacks or technical malfunctions.
- Regardless of other forms of investment – cryptocurrency rates are independent of other asset classes such as stocks, bonds or others.
What Speaks Against Cryptocurrencies:
Governments are losing control – cryptocurrencies are undermining state influence on monetary policy. Governments may lose control of the monetary system. This makes citizens more independent, but also involves some systemic risk.
- Lack of acceptance and trust – against cryptocurrencies speaks of lack of acceptance and trust in the populations. How should people know if they can trust the new currencies? More will certainly show the future, when today’s young people have grown up. Will it be normal for you to pay with cryptocurrencies?
- No more centralization and control – With cryptocurrencies, it’s easy for individual players to bring a market under their control and make an undisclosed choice. In the area of cryptocurrencies, there is neither proper regulation nor control. Often the transactions also run anonymously or under a pseudonym. Criminals can calmly take control of cryptocurrencies and use the market to their advantage.
- Technical risks – Cryptocurrencies can fail or even “break down” due to incorrect updates or other technical errors. This is a risk that is not so pronounced with the traditional currencies.
Time Will Tell
Whether the positive and negative assessments are truly realistic, only time will tell. It is interesting, however, that well-known figures like Bill Gates are in favor of cryptocurrencies. And the World Economic Forum (WEF) forecasts that by 2025, ten percent of global economic value creation will be handled through Blockchain. That could be $ 8 trillion. That would be almost a hundred times the current level.
For Whom Are Cryptocurrencies Suitable?
You should bring that with you:
Play money – the money you invest in cryptocurrencies should be “play money”. Money that you do not really need and whose loss you can easily handle.
Time – you should see the investment in Bitcoin in the long term and not be driven by the dream of rapid wealth. Be a long-term investor with a cool head.
A Stable Nervous Costume – You should have your emotions under control. A loss of 50% or more does not throw you off track or lead to emotional, hasty decisions
In these cases Bitcoin is not for you:
Long-term asset accumulation – Bitcoin should be at most a supplement to your investment portfolio at the current stage. Do not invest too much money in bitcoin and cryptocurrencies because they are high risk and high volatility. I recommend investing a maximum of 5% of the portfolio value in Bitcoin and Co.
To gamble – most speculators in the private sector lose a lot of their money. If you are not really familiar with the subject matter and price developments, you should not try to gamble with cryptocurrencies. The price developments are often simply too unpredictable.
Panic – if you can not sleep at night, do not invest in Bitcoin and other cryptocurrencies. They are often subject to extreme price fluctuations and can bring even seasoned investors into a sweat.
The self-test – are cryptocurrencies suitable for me?
In the end, everyone has to decide for himself whether he wants to invest in cryptocurrencies and how he assesses the development of these: With the following questions one can estimate a little whether one is suitable for this or should rather stay away from it.
My Conclusion & Practical Tips
Bitcoins are new and innovative – with a growing interest of the masses. Nevertheless, Bitcoins & Co. remain a very speculative investment with high price fluctuations. The same applies to crowdfunding, where high risks are up to the total loss of the investment. Of course, the return potential is correspondingly high, especially if you can sit still for several years and wait for the right time.
Really only invest “play money” that you are willing to lose.
Little Psychological Trick by Tim Ferris: Written off the money as if it were lost, then make profits twice as much fun and a possible loss does not weigh so high.
Nobody can tell you today how the cryptocurrencies will develop and where they will be in a few years. Personally, I believe, however, that the underlying blockchain technology will definitely last in the long term. For the success of the crypto currencies above all the confidence and the faith of the users is necessary.
If you’re considering investing in Bitcoin, try answering my questions and finding out if Bitcoin is right for you. Ultimately, you always have to decide for yourself and you yourself are the best investment advisor.