If it sounds too good to be true it probably is, even for Crypto
Compiled for John Lombela, Managing Director of African Investment and Technology company, Cryptovecs Capital.
There’s a fine line between investing and trading. Cryptocurrency investing isn’t trading nor is it associated with trading and that is where the misconception and confusion come from. And with the changing business landscape, it seems as though the best way to create wealth in today’s era is to invest in disruptive innovative projects or businesses that have the potential to yield multiple returns as they reach maturity.
Even though these types of investments often generate oversized gains for investors, they do leave loopholes that result in people who are looking for a “get rich quick” scheme being scammed.
With that said, is there a specific time to buy crypto? No, not really. One needs to research prior to investing because it’s all a gamble. Cryptocurrencies represent one of the best investment opportunities that the world has ever seen in centuries. Over the last 10 years, Bitcoin alone has presented an average of 10,000% gigantic returns that no one has seen in traditional investing.
However, these investment opportunities have come with their own risks because not every cryptocurrency is a good investment. Some cryptocurrency projects have raised significant amounts of money but are yet to deliver on their promises while others have gone completely bust.
Investing requires one to educate themselves because investing pertains to one building wealth over time, unlike trading that requires constantly buying and selling assets on a market. In order to trade carefully, one needs to understand their end goal and objectives. You need to spend what you are willing to lose when investing or trading because the market can never guarantee any returns.
And there is no such thing as investing the right way. Investing requires one to have a thick skin because you are bound to lose money along the way. Fortunately, there are “golden rules” that can help you invest appropriately, such as:
• identifying and knowing the team behind a specific project,
• reviewing the business model and whether it makes sense,
• looking at what problems are being solved,
• and determining whether there is a market need for the opportunity.
The bottom line is that investing requires time, you need to be able to analyse the data at hand, be willing to take the risk, and trust yourself when selecting a team that will effectively execute the strategy behind the project. The data analysis is part of the process of doing your own research (DYOR) and deciding whether it is a good investment fit or not for one’s appetite. And even though algorithms and or AI trading bots generate good results when market conditions change, it is impossible to generate the same results constantly and they will have to be reprogrammed to accommodate new market conditions. One needs to understand the underlying technology built and what it is solving as a disruptive technology.
The starting point for any investor is to review the team’s claims about what they ought to achieve, checking on their individual history and or past experiences. You need to look out for false claims and or false evidence of promised returns as no one can ever guarantee any returns.
If it looks too good to be true, chances are it is. Projects that promise high-yields and guarantee returns within a specific period are a red flag.
Is there a DIY when it comes to investing?
The only DIY that one can do is to choose to spend time understanding the field in which they want to get involved in. When it comes to trading or investing, understand all the risks associated, and understand the opportunities, weigh the two and decide to get involved based on your own preference of risk or your appetite for risk-taking. Nothing worth doing comes without taking risks, you need to understand what level of risks and for what type of rewards you are looking to take.
As enticing as these opportunities are, don’t fall prey to scams. One way to avoid being scammed is to refuse to put capital in anything that promises any good returns immediately without understanding the risks associated.