Cryptocurrency investments are not for everyone
Cryptocurreny is High Risk
The strong of heart and mind can thrive in the decentralized marketplace. However, unless you are able to take on significant amounts of risk and hold on through thick and thin, cryptocurrency investments may not be for you.
There are several ways to determine risk, cryptocurrency can be very erratic and unpredictable. It is important to understand some of the inherint risks before diving into an investment.
This problem is no longer nearly as much of an issue as it used to be. However, in the case of a network attack or hacking attempt it is possible to lose most or all of your investment. (Though again with new security protocols this is very unlikely)
- Hacking of your personal wallet is unlikely, especially if you've put proper security protocols in place to protect your account. If your personal wallet were to be hacked, you would unfortunately be out of luck. However, if an entire exchange were to be hacked it is possible you could receive some currencies back if the network decides the intrusion was large enough to fork itself.
- Network attacks are often nothing, all of the supposed attacks on Ethereum have never gone anywhere. Regardless, news of such attacks gives many investors cold feet and people begin selling out of fear and the price can drop drastically. This price drop should only be temporary, unless the network is successfully attacked, in which case the currency will likely lose all value. (No network attacks have ever been successful to date)
If an investment you made into an ICO or less-established smaller currency releases a bug-filled platform, the investment will typically go belly up or at least lose most of its value.
- The platform may have been launched prematurely, development of many key features were missing and the perceived value of the currency drops very low and often does not recover.
- Launch was executed poorly, bugs were everywhere, the founders were no where to be found. This can and does happen in the case that the founders were not qualified enough to start such an ambitious project as they may have taken on.
- Launch does not even happen. This is incredibly rare, I haven't seen any currencies fail to launch at least a basic prototype, ever. Though it is still possible that the founders of the currency may just disappear off into the sunset if the platform is not coming along as planned, or they may have just been con artists who never planned on building it in the first place.
You have to be incredibly savvy while investing in cryptocurrency, it is very important to thoroughly vet the founders of the currency in which you are hoping to invest. Lack of management skills and/or technical knowledge causes many start-up currencies to fail.
Product Was Not Viable
Sometimes currencies launch with no issues, but people do not like the concept. It is very rare that a successfully launched currency with a new idea completely fails. This is why you must be able to conduct research and analysis of the technical implications of the platform effectively.
Currency Beaten To Market
It is important to be aware of the competition, if competition exists you must be able to determine what differentiates your currency. If the market decides one is clearly better than the other, the other currency will often be beaten out if the launch is not timed properly.
New currencies sometimes launch without proper marketing campaigns which means the platform gets no use and early investors usually jump ship upon launch if this is the case. To avoid this you should look at their history of marketing techniques implemented to date: social media, conferences, and other exposure can be indicators of the founding teams marketing capabilities.