By Kenny19 | good bar | 2 Sep 2020

Find our 6 tips for investing successfully and knowingly in crypto currency.

1. Understanding Blockchain Technology
Before investing in this type of currency, make absolutely sure that you understand this innovation and especially the technology behind it. It ultimately comes down to fully studying the Blockchain technology from which crypto currencies originate. Also, and above all, pay attention to the details that differentiate currencies from one another: the programming language, the blockchain validation system, governance, the currency's ability to adapt to an order of magnitude change of demand for example.

2. Take into consideration the token expansion limit
The unit of cryptocurrency is called a token. The number of tokens created can be limited, as is the case with Bitcoin which will be limited to 21 million Bitcoins in circulation, making the product relatively rare, which of course contributes to its value. But a cryptocurrency can also follow a deflationary pattern. In this case, the quantity of money in circulation is unlimited, which could over time encourage the stagnation (or even the decrease) of its price.

3. Check the transparency of virtual currency
Choose a cryptocurrency with a website with clearly identified investors and developers, a presentation of the project, possibly a roadmap indicating the planned technological advances. If none of this is accessible, beware, you could invest in a Ponzi scheme.

4. Stay informed on cryptocurrency websites
To be up to date in this ultra-niche and ultra-geek field, and therefore to ensure an investment under the best conditions by having all the information on the targeted asset, it is better to look for the information where it is found, that is to say on the web! Many cryptocurrencies offer their own websites, but broaden your research to community websites like Reddit or Slack which will allow you to publish, consult articles, discuss and share issues and opinions. The Bitcointalk forum fulfills the same role but is exclusively devoted to crypto-currencies (not just Bitcoin because it has a dedicated altcoins section).

5. Learn about the quality of virtual currency developers and their funding
What makes the success of a crypto currency above all is the quality of the developers who are at the origin of this innovation. So check their experience, education, work history, etc. Do they form a close-knit team with good rapport? You can verify that their interactions on the Slack or Reddit community are both cordial and constructive.

Finally, you must know who pays the developers: a company or a private equity fund outside of cryptocurrency? Are developers paid with their cryptocurrency? The important thing is to be able to assess developer motivation and possible conflicts of interest.

6. Limit your investments in these volatile high risk assets
One of the major characteristics of cryptocurrencies is volatility. Thus, the value of an encrypted currency, i.e. its price, can rise or fall, very quickly, in unpredictable ways. In question: its young economy, its unusual nature and especially its sometimes illiquid markets. And the number of platforms further adds to the lack of liquidity of the tokens. Thus, at the end of 2019, "a volume of 143 bitcoins is enough to make its price vary by 1% on the Bitstamp platform. Coinbase and Kraken are much more liquid, and it is respectively 456 and 672 bitcoins that must be exchanged to move the price of the crypto leader by 1% "reports the site Les Echos.

Investing in crypto currency is therefore not recommended for cautious profiles with a strong aversion to risk. For others, remember not to keep a large part of your savings in Bitcoin or other which remain high-risk assets. There is a real risk of losing much of the money invested.

If the adventure of cryptocurrency tempts you, go for it with money that you are willing to lose. It must be an investment representing a very small portion of your financial assets. Cryptocurrency is more of an experiment to try if you feel like it than a reasoned investment made with a view to diversification. Wanting to make money really fast is never a good reason to invest in cryptocurrency.

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