The rising value of the cryptocurrencies can lure you into getting in. However, your success as a cryptocurrency investor depends a lot on your risk tolerance.
When it comes to investing in new cryptocurrencies there is one thing you need to know – All cryptocurrency ICOs or initial coin offerings are gambles. They do give you a chance to achieve high returns; but they also come with a great level of risk and volatility.
Before you think of investing your extra cash in new cryptocurrencies, it would be wiser to understand the pros and cons that are associated with it.
Pros:
Massive potential for returns
People who had invested $1,000 in Bitcoin in 2013 are now finding their investment worth $400,000. Stratis has managed to achieve a 63,000% increase in the price of its ICO that it had raised for $600,000 in June 2016. Spectrecoin’s $15,000 ICO raised in January 2017 is now 13,000% up. There is no other form of investment that can give this kind of returns.
Shorter time horizon
In late October 2017, Datum launched their ICO after raising $1.5 million in pre-ICO funds. The cryptocurrency has already received a good amount of support and the investors are waiting to cash out their investments shortly. Unlike other forms of investment you don’t have to wait for long periods in the case of cryptocurrency.
Increased liquidity
You will have to literally find a purchaser if you want to sell the equity that you bought of a startup. However, there is no such waiting in case of cryptocurrency ICO. Since it is all built on network you will be able to sell your cryptocurrency for dollars or ether almost instantaneously.
Clear direction for execution
The initial speedbumps can make it tough for startups to launch their IPOs. You don’t know which direction the business will go in once you purchase your equity. However, in case of cryptocurrency ICO, you would know exactly what the network will do. You will be able to evaluate the product-market fit and then use the insight to determine the investment.
Cons:
Increased volatility
An issue such as a hacking incident has the power to cause an instant loss of investment in case of a cryptocurrency ICO. Incidents so drastic may not be common; but there sure have been major drops in the values of the ICOs.
Potential network stall
Cryptocurrencies work on networks and if the network fails to attract users to use the platform, the currency will start seeing a drop-off in its price. It is this lack of network engagement that has resulted in the failure of many recent ICOs.
Potential shortage of resources
Like startups cryptocurrency ICOs tend to fail if they don’t raise adequate amount of money. This is why most cryptocurrencies have started doing pre-ICO raising. This will help them gain firm commitments of demand and resources.
Potential mismanagement
A solid founding team is essential for a cryptocurrency to navigate successfully from the ICO phase to the mass-market levels. However, since every cryptocurrency is essentially a startup not every founding team may be solid enough. Hence it is crucial for an investor to look into the background of the team members and evaluate their skill sets and capabilities before investing in the cryptocurrency.
Today there are many cryptocurrency tools that make investing in cryptocurrency ICOs easy and fast. Bitcoin gold mining pool is one such tool that is worth testing.
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