So, you recently stumbled upon cryptocurrency. Surely you also have already heard one of these countless stories of people who claim to have made a bunch of bucks with Bitcoins for instance. But most of the time you hear that they invested extremely early. The question, which of course is now of biggest interest: Is it still profitable to in cryptocurrencies? In the following I will give you four reasons why an investment in Bitcoins, for example, still makes sense and which mistakes you should absolutely avoid. But let’s start with a short, instructive story – from which, if you read the article to the end, you can certainly take a lot with you. Now then, another story from the section:
Stories written by life
Imagine a person, let’s call him Musli. Bit of an exotic name, I know, but let’s call him that.
Musli invested some money in Bitcoins as early as 2014, when he was even more naive and younger than today. At that time, the price per bitcoin was about $800. This should be the misinvestment of his life! At least that’s what he thought. Since it was the first time he had invested in anything, he looked at the Bitcoin Prize every day (several times). The market fell and fell steadily, Musli became more and more nervous, and the price soon reached about $550. A disaster! What else could he think of but to sell the Bitcoins as fast as possible in order not to lose everything completely. Thought & done. Musli was now without Bitcoins, had lost 30% of his money and wanted to forget the whole story. That again: Thought, done. Until January 2017, he simply did not care about the crypto market at all.
What do we learn from that?
So, do you have any idea who that mysterious person named Musli might be? Yeah, that’s me! A person who has clearly made a very big mistake in retrospect. A mistake I don’t want you to make. A mistake that has happened to so many people. A mistake that I think nobody in this market should ever make. I panicked. I panicked, and I lost money, a lot of money. Do you understand the last sentence? I lost a lot of money – but not because I had made a really bad investment that turned out to bring me shit after years, no, it’s for the simple reason that I invested into something I didn’t really understand at that time and just panicked when I saw the price decrease “all in a sudden” within just a few weeks. But what you need to know is that this is completely normal. Cryptocurrency is probably the most volatile investment of the world right now. You can have a 30% loss within just a day – and then a 50% increase the next one. Now, that’s not something that happens a lot (at least not with such extreme numbers), but it happens. And you need to learn to just not panic and “hodl”. (Hodl is a crypto-insider and stands for hold – keep your investment and don’t touch it, everything will turn out just well 🙂. And, considering the insider “hodl” is from 2014, you can definitely see that’s a pretty good strategy😉)
But what should make you think the train hasn’t left yet and you should still jump onboard? Now, here come my
Four reasons why it’s still profitable to invest in cryptocurrency
#1: Blockchain is the future
Probably you don’t even really know what a blockchain is right now. That’s why I’ll explain it to you briefly (quite simply, not too technically detailed): The Blockchain stands for decentralization, unchangeability and transparency. All possible data can be collected, verified (confirmed) and viewed. And all this without an intermediary who controls everything and who you have to trust (for example a bank). In the case of Bitcoin, transactions are processed in the blockchain, but it can also be used for completely different things and is actually already used elsewhere. Thus, the second largest cryptocurrency “Ethereum” is based on a blockchain which allows you to create decentralized “Smart Contracts”. In normal language this simply means that it is possible to process certain procedures (contracts) via this blockchain – completely transparent, clear and automatic – without an intermediary. For example, you could sell a house without a notary. Or you could have something as simple as a coffee machine brewing a fresh coffee every morning and paying for that all by itself. Sounds really cool, doesn’t it? If that got your attention, here I have an interesting Forbes article for you on what actually is already possible and built on the blockchain: 35 Amazing Real World Examples Of How Blockchain Is Changing Our World
#2 The Bitcoin is the mother of all cryptocurrencies & limited: Enforcement as an investment
Bitcoin is currently the largest, most popular and best-known cryptocurrency – the undisputed number 1 with a current market share of 37.1% (source: Coinmarketcap). But that’s not what makes it so valuable. In fact, the bitcoin is currently technically at a disadvantage compared to some other cryptocurrencies. By this I mean that a larger Bitcoin transaction can quickly cost you two dollars or more in fees if you also want it to be relatively quick. Competitors such as Litecoin also manage to execute very large sums quickly and easily with only a few cents of fees. But the Bitcoin has two attributes that make it so incredibly valuable:
1. Bitcoin is the Mother Of All Cryptocurrencies.
The very first. And that’s probably why, even if there will be an offshoot (or state cryptocurrencies) later on, it will still have a high status. Because the Bitcoin has ushered in this new era. In fact, I guess Bitcoins won’t establish itself as an everyday currency – since the state will probably just bring out its own cryptocurrency – but I think that in the future Bitcoin could function as an investment opportunity like gold for example. Because at the moment bitcoins are actually used for the most part as just that.
2. The number of bitcoins is predefined, or as marketers would probably say: strictly limited.
This is another feature that makes Bitcoin such an extremely lucrative investment. There are only 21 million pieces, there can and will never be more. Strictly speaking, these 21 million do not even exist at the moment – because bitcoins are still created through what is known as “bitcoin mining”. According to blockchain.info there are currently about 16,750,000 BTC (short for Bitcoins) in circulation. That makes 4.250.000 BTC which still have to be mined. According to calculations, the last bitcoin block (in the “block”chain) is to be mined around 2140 – so it will take more than a century. But this is only because the number of bitcoins distributed per block for the miners is halved about every 4 years. This means that by 2036 more than 99% of all coins will already be in circulation. But enough with the numbers, this limitation is a feature that is extremely popular among gold investors, for example. And bitcoin has exactly the same. If you only get one, you’ll already have one of 21 million. Not so little.
#3 An entire state already relies on cryptocurrencies: Venezuela
Venezuela has been in a major crisis for some time. To be more precise in two: The state is in an absolutely bad state, politically as well as economically. Economically, the country is now trying to save itself with the help of a cryptocurrency: it is called “Petro”. That’s the Venezuelan word for oil. As the name suggests, the cryptocurrency is to be covered by oil reserves, mineral and diamond deposits – because Venezuela is the country with the largest oil reserves. Head of state Nicolas Maduro – obviously a crypto fan – is trying to do something like this against the high inflation of the national currency, because it has lost 1000% in value last year. Bitcoins in return have gained about 1000% in value. (Source: spiegel.de article “Cryptocurrency should save Venezuela’s economy“) Let’s hope Venezuela succeeds in saving itself.
#4 The crypto market is already being covered by companies worth billions and is meeting with approval
Cryptocurrencies may be very new, but the Internet is fast moving. Several companies which operate with enormously high sums have already formed in the crypto market – a large part of those sums in cryptocurrencies, of course. Meanwhile, the Austrian Dr. Julian Hosp should no longer be an unknown face even in Germany – where the crypto fever can still be felt the least. The co-founder of TenX has already been to GEDANKENtanken or Galileo and his company is now worth over half a billion euros. TenX offers credit cards that allow you to shop conveniently in non-virtual life using cryptocurrencies. At REWE, for example, you could use your credit card to pay for your weekend purchases via Bitcoin and other cryptocurrencies. And I think you’ll be able to think of at least one big company where you’ve already seen a “Bitcoin accepted here” button, right? Be it Microsoft, Steam or Wikipedia. Cryptocurrencies are simply becoming popular and more and more trusted by the general public. I am firmly convinced that they will succeed. And that bitcoins will also establish themselves as an investment option.
And, convinced? No?
Hmm, wait, a fifth reason has just come to my mind:
#5 It is simply much too early to even think that investing in cryptocurrencies is no longer profitable!
Meanwhile, the total market capitalization of cryptocurrencies is just under 500 billion dollars. That may sound like a lot of money to some people, and it’s also a lot of money, but here just for comparison, so you can see how abstrusely small it actually is: the eight richest people in the world together own 600 billion dollars. That means the 8 richest people in the world could buy up the entire crypto market together. Everything. Any cryptocurrency. If cryptocurrencies should establish themselves even roughly as investment possibilities or even money, this is of course unimaginable. Do you understand how small the market is now? That it is still worth investing in cryptocurrencies? No? Then let’s move on… A comparison from an article by TheMotleyFool, 22nd August 2017:
According to a 2013 Thompson Reuters report, it was believed that 171,300 tonnes of gold had either already been mined or would still be in the ground. We get 32,000 ounces per tonne, so we are talking about 5.482 billion ounces of gold around the world. If each ounce is worth about $1290, then the global gold supply has an implied market capitalization of $7.07 trillion. This is more than a hundred times the market capitalization of bitcoins at an all-time high.
But before you run, sell your house and put all your money into Bitcoins, always remember the story of the little Musli who lost more than 30% of his money through the evil, evil Bitcoins. However, his investment would meanwhile be almost 30 times the value of what he initially put into it. In order for such a mistake not to happen to you, I now have
3 lessons to avoid big mistakes (and loss of money)
#1 The market is very, very volatile
You’ll have noticed by now: The crypto market is probably the most volatile one there is at the moment. It is not extremely uncommon that bitcoins (and other cryptocurrencies even easier) increase 50% in one day. However, the fact that they lose 50% of their value in one day actually happens very rarely and then usually has serious reasons. In the past, for example, this happened several times when known exchanges were hacked. However, falls in value of 20% or even more in just one day can be observed more often. This is usually simply because the price has risen extremely before, so the big fish are now taking some profit with them. The most important thing is: don’t make panic sales and never sell your cryptocurrencies in case of loss. Unless, of course, there are very, very good reasons for it. For example, if the developers have stopped working or you only realize afterwards that the coin you bought is a so-called “shitcoin”. Otherwise: The course will soon go steeply uphill again and you should not panic now.
#2 Think for the long term
This lesson is very closely related to the previous statement that you should never sell your crypto currencies on loss, but it is not the same. By that I mean: stay with the cryptocurrency you bought! (of course again if there are no very good reasons against it). Many people make the big mistake I made in my early days: they see that another cryptocurrency they almost chose is experiencing an extreme boom. Your own coin, on the other hand, may even be falling a little. What could be more obvious than selling your own coin against the other cryptocurrency, which is obviously much more profitable? That’s one of the worst things you can do! Just try to think long-term and just don’t touch your already bought cryptocurrencies anymore. If you discover another good investment opportunity, simply put in more Fiat money instead of trading with your cryptocurrencies. Of course, this does not apply if you are already an experienced trader and think you can make good profits. But even among those who think they are good traders, the fewest really are. So, hands off your investment.
#3 Don’t get overconfident
Because haughtiness comes before the fall. It is astonishing what a – one could almost say – kind of “loss of reality” many crypto-investors suffer from. I have had to read several times in social media that one “only” made a profit of 100%. “only”. That is, if you only stay in the crypto market now, not so much: But you should never forget what it looks like outside the crypto world! If you invest in real estate, for example, you usually have to wait many years, if not decades, for your return of 100%. Real estate is considered extremely secure and investing in cryptocurrencies is extremely risky, but honestly, I think that’s pretty silly. If you invest wrongly in real estate, you can also take a big risk there. And if you invest properly in crypto currencies, you can keep your risk there quite low.
Conclusion: Is it still profitable to invest in cryptocurrencies?
Yes, investing in cryptocurrencies now is in my opinion by no means too late and you could certainly take some profit with you. Please note, however, that due to the very high volatility of the market you should only invest “play money” in it. This actually applies to all investments you may make in the future, even outside the crypto market. Play money is money whose total loss you could easily withstand. You should also take my lessons to heart and always be careful not to panic if there are major fluctuations, because with cryptocurrencies these fluctuations are still very normal.
If you are in a buying mood now, you can buy many different cryptocurrencies (also bitcoins) and get an extra 10$ on top of your first 100$ investment here.
If you consider everything I mentioned in this article, nothing stands in the way of an investment into cryptocurrencies. Have fun choosing your crypto portfolio! Tip: As a beginner, there is nothing wrong with buying Bitcoins first.
Do you have any questions/suggestions, or just want to give your opinion? Write something in the comments, I read everything through 😊