Investments are going strong, with September looking at more than $128 million raised for projects around the world. Even in 2018, when things are looking gloomy for the crypto markets, the number of investments have already surpassed what was raised in 2017. This means that regardless of hype, low market caps, and general discouragement in the crypto community, investors are active and investing in lucrative projects that have a potential for growth.
This article is a cautionary message for investors to slow down, and to analyze their choices thoroughly before committing to any specific project. We will do our best to illustrate the hidden dangers for new investors. Institutional and experienced investors will not find a lot of value by reading this article, but you are welcome to join in the comment section with your own advice for investors that are barely joining this beautiful, and crazy, decentralized economy.
It’s a provocative article and designed to challenge the unrealistic ideas that junior investors have, so if you get a little bit upset and uncomfortable, I have completed my goal to make you think more. The standard for the typical crypto investor is low, with most people looking for a pump and dump scheme to get in and get out with more than you came with.
1. Think long-term (and also short-term)
Investments are generally a commitment. You should think about your funds being locked in a project for up to a year. That’s also a short-term in the traditional market, but quite long-term in the crypto economy. It’s important to consider how long your funds will be frozen in a specific project.
To prevent pump and dump schemes affecting the projects, you can sometimes find that investor funds are frozen for a significant amount of time. You should be aware of these conditions for every investment opportunity.
2. Read the whitepaper
Don’t just skim it to check the bonus. Read it and analyze it. Understand the team behind the project and get acquainted with the facts of the story. Analyze their pitch and see if it makes sense, or it’s just fooder text.
A lot of scam projects include very vague, unspecific language. They do this because they want to abuse the people that “don’t have enough time” to make a good investment. They want to take advantage of the emotions and feelings that people get when something “magical” is being presented to them.
Something like that, for example.
3. Evaluate projects thoroughly
Investing blindly is not recommended. Just because you believe in the vision and mission should not be enough to convince you in your decision to invest. This overlaps with the previous point, which suggests that you should look closely to the language that projects use.
Call the companies and the numbers they leave. Arrange somebody you know to visit their offices and meet the people behind the project.
Check how active their Telegram channels are. If there is a lot of members, but not a lot of conversation, that’s not a great sign.
There are a lot of signals that giveaway scams, and if people that lost a lot of money actually looked for them, they wouldn’t lose as much money as they did.
4. Make your investments have clear goals
Why are you investing? What is going to happen once the ICO is complete? How long are you going to hold the investment? What are your expectations for this particular investment?
These are the type of questions you should be asking yourself after you determine that the project is legitimate and has a serious chance for success.
This suggestion is to improve and learn more about investing before getting into this world and spending your saved money. Saved money, stay saved, and there are no results without taking a risk, but I’m sure we will both agree that there is a lot of value in eliminating unnecessary risks.
Investment education is one of the best ways to eliminate risk.
5. Ask more questions
Prepare as many questions as possible and barrage the team of the project you want to invest in. Any inconsistency in their answers or avoidance is a great signal for you to get out.
Don’t involve yourself in stories that make no sense. You don’t hang out with that one guy that always lies and makes up stories about what he is doing or going to do. Why would you do exactly the opposite with a crypto project?
There is no free lunch
Investments always come at a risk, and we would all do well to remember this. Many scams are based on the idea of people to believe in fantasies. Combine this with a limited time to make a decision and you have a winning scam model, especially if people are passionate about your offer.
The main selling point here is credibility, and such was the case in the scam going around that the “Dragon’s Den” investors got super hyped up about a bitcoin app that enables fast and easy AI-powered trading that makes you a lot of money.
Obvious and blatant scam, but the presentation is well-made and for a moment believable. Checking makes it easy for anybody to realize this is a scam, but that’s why the scam only works on people that are looking for a fast, easy, hands-free experience for their money to make money.
Nobody is going to make you money, and most likely they are looking at you to make money. And then just leave. There is nothing stopping them from doing so, especially with cryptocurrency investments.
Unlike traditional investments which have a high barrier to entry, are heavily regulated, and include equity into a real company, cryptocurrency investments very often leave investors with tokens that have close to no real, practical value. Their entire token supply is a speculative market.
One could argue that all cryptocurrencies are speculative, but the reality is that only their value is speculative and determined by the market. If we could see fiat currencies so transparently, we might say the same. Bitcoin, Ethereum, Litecoin, DASH, zCash, and Bitcoin Cash, are all reliable methods for making transactions.
The ability to transact is their practicality, which compared to a token on Ethereum which does nothing but promise to be used in the future once the solution is ready. That’s not a bad thing, but you, as an investor, need to be aware of all limitations that a project has, before committing even one dollar to that project.
We at Crypto-news.net wish you a great experience with your investments. The reason we are creating these articles is to provoke and remind people to remain safe, and to highlight that it is your responsibility to avoid dangerous investments. Don’t be a victim of your own fantasies, because there are people out there that would be more than happy to give you the promises, without the results.
Experienced investors reading this article are encouraged to leave a comment and share a short story or some advice with our readers. It is highly appreciated if you do that. Use that experience for the greater good, and guide the new crypto investors to success.