Cryptomino hazards: Can I invest all my savings in digital currencies?
Not to say horrible idea, just bad! The extreme volatility in the value of these currencies can cause you to lose more than half of your savings…
If there was something that would make us rich in an instant, believe me there would be no rush-hour traffic. It took years for the first investors in Bitcoin to earn big rewards, increasing from a few cents to where it is now, or has already been.
There is a lot of noise about these coins, especially about Bitcoin. In behavioral finance there are some phenomena of purchase/sale exaltation. In this case it was a phenomenon in which the majority does not know what they are investing in, part of it without any financial literacy, and prefers to listen to the crowd. What happened next? Prices fell as soon as many bought. There were hundreds of thousands of cases where they borrowed or used all their savings to buy Bitcoin.
There are many opportunities to make money with electronic currencies. For this to happen, we have to have 2 requirements: have patience, and be wise to get the right knowledge before there for money.
There are thousands of crypto coins to be created per month. Each one has its purpose and manufacturing method (algorithm). Before buying this type of coins, one should invest some time in researching their manufacturer, their purpose, listen to many opinions, listen to credible people on the subject, and read many forums that exist on the subject.
There are no fixed incomes when investing in this type of coins, and one must be careful with the schemes that can be created, because this type of coins is not yet regulated.
I would like to leave you here, in my opinion, my 3 biggest dangers of cryptomo coins:
Cryptomotes dangers – Manufacturer
The manufacturer and his manufacturing method are very important.
Did you know that you can create your own currency? What if you create it, do not give the proper maintenance, or simply turn off the server? Yeah, I guess you’ve wondered what would happen.
Cryptomime Dangers – Hype
What is Hype?
Hype is the extreme promotion of a person, idea, product. It is the subject that is “giving what to talk about” or something everyone talks about and comments about.
It’s possible to make money based on the Hype. But not everything is a fairy tale and there’s a considerable chance that this strategy will be a shot in the dark. It was at the top of the Bitcoin Hype that many put all their savings and/or borrowed to buy Bitcoin. The result was catastrophic for those unfortunately. What was the reason here? Lack of patience.
Cryptomaniac Hazards – Custody
Where do you keep your savings in physical currency? Bank or in a safe deposit box, right?
We keep our money in banks that we trust. Banks that have some weight in the market, disclose accounts reports, banks that are audited, etc.
We still don’t have these banks of “our confidence” guarding these electronic currencies. For these banks, due to the novelty and extreme volatility, they have many reasons not to do so yet, mainly the lack of regulation.
To buy bitcoins we have to buy on a website (no fixed bank counter). Here there is a high danger because I have read dozens of news that many sites are inactive – the traditional error 404, “page not found”.
The “not found” is not the only one to fall into this category. There is a danger that the website will be pirated, and coins stolen or “destroyed”.
It is also necessary to obtain the necessary information so that our cryptomime custody can be trusted.
In addition to the dangers mentioned, there are many risks involved. One of them is extreme volatility. Volatility measures dispersion at the average of profitability. We can easily see that today we can have Bitcoin value 15% in the morning, like after lunch devalue 20%. The instability of setting a certain trend is the greatest risk that can exist in this type of asset.
We can see below the annualized volatility (30 days period)
After all, can I invest or not?
To those who ask me if they should invest or not, I always advise – to those who want to – to invest a reference of 10% of their savings. We should never concentrate our investments in only one asset (basic principle of diversification).
For those who buy this kind of currencies should be aware of the dangers and risks associated. With the ease of access and rapidity of obtaining information about cryptomens, there is no excuse to say that “I didn’t know”.
There is a fantastic website to see the size of this market: Cryptocurrency Market Capitalizations
Time goes by and news travels, and continuous faithful to my initial position: cryptomaps are not an investment, but a different means of transaction, electronic in this case.