Posted By: Admin
On: October 29th 2017
Category: Entrepreneurship, Bitcoin, Finance
Some Things to Consider When Investing in the Volatile Cryptocurrency MarketS
There are a number of reasons that more and more investors are being attracted to the possibilities of investing in the growing cryptocurrency market. What is driving growth in the sector is an emerging recognition by a greater number of people of the potential for Blockchain technology and cryptocurrencies to fundamentally impact the financial services industry, as well as many other sectors from healthcare to insurance.
Bitcoin (BTC), the largest by market capitalization at over $81 billion, and then others that are not as well known to the general public. In order of market capitalization the next five largest after bitcoin are ethereum (ETH), ripple (XRP), bitcoin cash (BCH), litecoin (LTC), and dash (DASH). When combining all six together we’re looking at a market capitalization that exceeds $129 billion. Then, if we include the hundreds of other digital currencies the market value goes to roughly $200 billion, approximately equivalent to the market value of Citigroup alone.
INVESTORS FOCUS ON THE BENEFITS
It can provide diversification for an investment portfolio, High volatility with the potential for above average returns, Separate asset class with distinct influencers, Not correlated to traditional asset classes, Growing worldwide demand and acceptance, Expanding market size.
VOLATILITY RISK CAN EQUAL GREATER OPPORTUNITY
The highly volatile nature of digital currencies is seen as a major draw by investors. Just in the past 30 or so days bitcoin has gained more than 90%. That’s after dropping 40% in 14 days prior from a record high of $4,979.90 reached at the beginning of September. Meanwhile, ethereum is up over 3,900% year-to-date and had recent swing of over 65% down in four weeks, followed by an advance of 190% in only seven weeks. These types of swings may be dangerous but they also create opportunity.
Have a clear investment plan prior to engaging the market. What are you trying to accomplish? Use lower position size than what seems necessary. Only put capital at risk that you can afford to lose. Have a clear risk management strategy. Know when to get out if you are wrong. Once you make back your principal take it out and then invest only with your profits. Scale out of profitable positions. Take profits off the table. If your portfolio size justifies it you can also use multiple exchange venues to compensate for the risk of trouble at the exchange level.
One of the first things to do to get involved is determine how much money and time you have to invest, what is your current skill and knowledge level and what needs to improve in that regard, plus, what approach you are going to take when investing. Are you going to get in and out as the market swings up and down, keeping in mind that Bitcoin for example can see swings in either direction of greater than 30% in weeks? Or, are you going to take a long-term buy and hold approach, and not worry about significant drops that may occur?
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