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Volatile Markets (Investment)

If you’ve ever heard of the stock market, you’ve come across the term “volatility.” You’ve probably even heard a certain market is described as “volatile.” In fact, the cryptocurrency market is considered to be one of the most volatile markets today.

But, what is this volatility?

Well, volatility is simply used to describe the current status of a market. A volatile market is one where the fluctuations in price are drastic and unpredictable. Now, volatility is something that affects every market. However, each market varies in how volatile it is. In other words, some are more volatile than others.

A more technical definition would describe volatility as a statistical measure of the market’s tendency to fall or rise sharply within a short amount of time. It is often measured by calculating the standard deviation of an investment’s returns. Standard deviation is a statistical concept that tells us the exact level of deviation or variation that we can expect.

In general, when a market is too volatile, investors are asked to avoid investing in it. However, if returns are what you are looking for, you need to invest in volatile markets. You see, volatility causes prices to move and the chances of a good return are often dependent on such movements.
Volatility and risk are related. The more volatile a market, the greater the risk involved in investing in such a market. The greater your risk, the greater the returns.

So, essentially, volatility is good for hardcore investors. But, at the same time, there is a limit. Your prospective return must justify the volatility. Even if the return is in line with the volatility, it is still better not to take a risk if it doesn’t feel right.

Now, the big question now is – how should you invest in the cryptocurrency market, which is one of the most volatile markets today.

Diversify

When it comes to investment in general, be it cryptocurrencies or actual shares/stocks, it is always a good idea to diversify. In other words, invest in more than just one kind of cryptocurrency. Investment is probably one of the few areas where it’s good to have your fingers in every pie.
In fact, don’t just invest in cryptocurrencies. Make sure your money is being spread across a varied asset portfolio.

Research ICOs Prior to Investing

ICOs (Initial Coin Offerings) is the standard strategy through which new cryptocurrencies seek funding. However, over the years, they have become a tool for scamming vulnerable investors. So, be warned.
There are a few that are regulated by the FCA, but most aren’t. So, be very skeptical when studying ICOs. Ideally, ICOs are for experienced investors, who have a thorough understanding of how it all works.

Be Thorough and Very Careful

As time passes, the cryptocurrency market will reduce in volatility, thanks to stricter regulations, more investors, and the evolution in digital payments technology. Having said that, it is always a good idea to study the risks before investing in the crypto market.

MD: Strategies to help you invest in a volatile cryptocurrency market.

History of Financial Markets

As the saying goes, history tends to repeat itself – whether in terms of financial markets or cryptocurrency market!

Stock markets have become an integral component of the global economy. Across the world, countries look towards stock markets to boost economic growth. The last decade has seen the emergence of cryptocurrency system. Whether in financial markets, assets or cryptocurrency, managing the risks of investment is key to success.

Early financial markets:

It was only in the 1500s that the first real stock market arrived, but there were some examples in the earlier times that were close to today’s stock markets. France started a system in the 1100s with “courtiers de change” managing the debts of farmers across the country for the banks, indicating the first example of debt trading and brokerage.

Later in the 13th century, it is believed that the merchants of Venice traded government securities. The concept then spread to nearby cities in Italy including Genoa, Pisa, Florence and Verona who also began trading.

Soon after many countries including Netherlands, Bruges, Belgium, Ghent and Flanders also had their own stock market systems in the late 1500s. It is widely accepted that Antwerp, the commercial hub of Belgium, was the birthplace of the stock market system that we know today. These stock markets traded in government securities or individual and business debts and not in shares of any company.

By releasing its shares on the Amsterdam Stock Exchange, the East India Company of the U.K. became the first publicly traded one in the world in 1602. The London Stock Exchange came into being in 1801, followed by the New York Stock Exchange in 1817. The NASDAQ (National Association of Securities Dealers) formed in 1971 was the first one to start trading stocks electronically through a network of computer systems.

Birth of cryptocurrency market:

As compared to the stock market, the cryptocurrency market is relatively in its infancy. American cryptographer David Chaum conceptualized electronic cryptograph currency with ecash in 1983 which later was implemented as Digicash. The NSA published in 1996 the first paper on cryptocurrency titled “How to Make a Mint: the Cryptography of Anonymous Electronic Cash.”

Ten years ago in August of 2008, cryptocurrency news made headlines as bitcoin.org domain name was registered while on October 31 Satoshi Nakamoto”, the originator of bitcoin published “Bitcoin: A peer-to-peer Electronic Cash System.”

A year later in 2009, the very first trading in cryptocurrency was recorded with ten bitcoin being sent by Nakamoto to a computer programmer, Hal Finney. In 2010, the inaugural sale of bitcoin occurred with the cryptocurrency having a monetary value being attached. The same year, one of the bitcoin users bought two pizzas for 10,000 bitcoins.

Since then, more than 4000 altcoins have come into being.

With new cryptocurrencies emerging in 2015, they continue to disrupt financial markets across the world. As it continues its journey to become firmly established as a mainstream currency, history as said earlier, repeats itself! The risks of cryptocurrency investments are very much the same as other investments. CryptoStops have developed niche tools to manage risks in a smart way by eliminating emotional decisions, maximizing token trades and formulating an effective strategy to get the most out of your bitcoin.

Get started with free trial subscription here: https://cryptostops.net

New Developments In Blockchain And Cryptocurrency Technology

Predictions have stated that the global blockchain market with experience a compounded annual growth rate (CAGR) of 71.46% over the next three years. Growth at that rate puts the estimated value at a staggering $4.4 billion! So, what is it exactly about blockchain technology that is fueling this incredible growth?

One of the main reasons that blockchain technology is so popular is the variety of new applications it can be used for. While still synonymous with cryptocurrency, the blockchain technology is in no way limited to crypto transactions. The implications of the technology are far reaching and there have been some exciting new developments in the area.

Development that are making the tech so popular

Financial organization: Distributed ledger technology has made using the blockchain favorable for a variety of online financial transactions. Charities are using the technology to invite donations with a more transparent approach to where the funds are going. The verification process of both organizations and donors can also be carried out much faster over the blockchain speeding up the entire process considerably.

Banks: The blockchain technology has been developed to allow banks to use it for faster and more secure financial transfers. With new layers of security being added to centralized ledgers and decentralized ledgers being virtually impossible to hack, blockchain technology is ideal for use in highly secure situations.

P2P content sharing: Blockchain technology is developing in leaps and bounds to create online marketplaces for content streaming and sharing. Using blockchain technology, individuals are being able to avoid having to post their content on a third-party site like YouTube or Facebook. Using a decentralized marketplace allows content creators to retain full ownership of their content. The marketplace also permits direct peer to peer (P2P) sharing or selling of content. This approach has also helped maintain the integrity of the content created making room for more creative expression.

HR: Blockchain technology has given Human Resources departments all over the world a big sigh of relief. Using the technology recruiting has become a lot more streamlined as all candidate information can be stored securely on the cloud and verified and cross referenced easily. Everything from a candidate’s education qualifications to work experience and even possibly criminal records can be stored on the system and pulled up using a QR code.

Smart contracts: Any interaction that needs a contract to be signed can benefit from blockchain technology. Smart contracts that are stored on the blockchain are more transparent and more difficult to tamper with. The increased security and quicker verification time offered by smart contracts make them a lot more reliable than hard copy contracts.

Digital identities: People give out a lot of personal information on the internet or a regular basis. Whether it is to make an online payment or to fill up a form for a health checkup, the information is put out there in the hope of it being secure. Developments in blockchain technology allow people to have complete control of all the information that they post on the internet and the only thing they need to divulge is a digital identity or key which can verify them while keeping all sensitive data protected.
These are only some of the developments in blockchain and cryptocurrency technology, the tsunami is yet to come.

Common Cryptocurrency Frauds

Experts believe cryptocurrency frauds are the norm rather than exception. Bitcoin estimates close to $3.25 billion will be lost because of worldwide fraud. Being prepared and doing due diligence are the best ways to avoid being scammed.

Here are some common frauds in the cryptocurrency world:

Untrustworthy exchanges:

Along with the rise in popularity of cryptocurrency, is the phenomenal increase in the number of exchanges. As they get to make a profit with the transaction fees, they are boisterous in getting the buyer’s attention. Not many exchanges are completely trustworthy. Some exchanges that have been popular have disappeared overnight leaving the buyer at large.

A case in point is the Mt. Gox exchange fraud. As an early exchange in cryptocurrency, it accounted at one point for more than 70 percent of crypto transactions-Bitcoin to be specific – worldwide. One fine morning in February of 2014, the exchange suddenly suspended trading. It was reported later that 850,000 Bitcoins valued at $450 million had been stolen.

Pump and dump:

Just as in mainstream stock markets, the pump and dump schemes are way too common in cryptocurrency world. While Bitcoin with a value of $110 billion may be difficult to manipulate, other altcoins are vulnerable to schemes of pump and dump. There are multiple groups on platforms like slack, IRC and Telegram some with more than 40,000-100,000 members. These groups are focused on price manipulation of altcoins with low market caps. With this, those who act fast get the price advantage while those who are late in acting have to deal with plummeting prices within minutes.

Pyramid schemes:

As the saying goes “if its too good to be true, it probably is.” Also called Ponzi scheme, this is a scheme that lures new buyers with unusual payouts that are too good to be true. Older buyers or investors receive payouts from this money that new investors put in and not from any profits. Ultimately the scheme collapses and promoters make off with the money.

Fake wallets:

The play store has plenty of fake android wallets which make it risky for investors to pick just any wallet randomly. Many wallets promise that the buyer has the control of his funds but without conducting thorough investigation, these may result in you losing your investment. As one of the easiest modes of scamming buyers, fake wallets can take your private keys and seed and rip off BTC as well.
Fake ICOs: Fabricating a fake ICO, creating hype and persuading people to purchase cryptocurrency is one of the most common scams. Anonymous team, unwarranted hurry in completing transactions, copied whitepaper, mismatch of oral and written statements, missing roadmaps are some signs of a fraudulent ICO. Examples of such frauds include Confido, Benebit and Centra Token.

How to avoid being scammed

The best way to stay safe is to do due diligence and a thorough research into every aspect of the cryptocurrency, exchange and wallets. Reading reviews and contacting those who have had a real experience with exchanges can also help. Avoid giving private keys of your wallets on any platform and report to the concerned authorities of any signs of fraudulent behavior. Going in for hardware wallets instead of virtual wallets and securing your computer against hackers with the use of potent anti-malware are absolutely essential to safeguard your investment.

ICO – What are They?

ICO stands for Initial Coin Offering. An ICO can be loosely compared to an Initial Public Offering or an IPO and is also a means of raising funds for a new business to take off. The main difference between an ICO and an IPO is that ICOs are strictly for businesses that are launching a new cryptocurrency coin, or something related to the crypto field.

How does an ICO work?

Any company that wants to launch a new coin in the cryptocurrency space needs to be able to fund the new venture. To attract funds these companies will approach potential investors and offer them the new coin at a low cost. The low cost is the Initial Coin Offering. In exchange for tokens of the new cryptocurrency, investors pay fiat currency or another form of crypto like bitcoin.
ICOs can also be used to launch DApps or decentralized app that can exist on the blockchain. ICOs are also used for launching other types of services offered on the blockchain like peer to peer content sharing and so on.

What is in it for the investor?

Investors who buy the tokens are hoping to get a good return on their investment. Using bitcoin as an example, back in 2010 when it was still early days for the coin the value was as low as $0.008. By December 2017 the value of bitcoin had reached $19,000. As you can well imagine, those who bought the coin back in the early days made a whopping profit.
It is the same with every ICO, those who invest and by the tokens early on hope that the coin or service will do very well and that the value will go up a good deal. Similar to buying shares in the stock market, investors in ICOs hope that when the value has gone up they can sell their tokens and make a profit. Alternatively, as the cryptocurrency gets more recognition it can be used to buy other products or services over the blockchain network.

The advantages of ICOs

ICOs have provided a large talent pool of developers a means to fund projects that would otherwise have not seen the light of day. The blockchain equivalent of crowdfunding, lets developers showcase what they have to offer and allow people who believe in their projects to invest in them. In a peer to peer environment, ICOs remove the need for involving banks or other lending agencies in obtaining loans to fund new projects. Also, people can see and choose first-hand what they want to invest in and assess the risks for themselves.

The disadvantages of ICOs

ICOs are not without their share of challenges. There is still a lack of basic regulation when it comes to ICOs so the risk to investors can be high. While the investors can enter into a smart contract with the developer or new business, and the investment might be a small amount, a lot depends on how well the coin or service will perform. There is always the chance of investors having to cut their losses and moving on.
ICOs have provided an even playing field for new developers and businesses to get a foothold in the cryptocurrency and blockchain environment.

ETFs for Cryptocurrency

Exchange-Traded Funds or ETFs in the regular stock markets track the stock index, commodities, bonds, or even a basket of assets. They trade throughout the day like regular stocks and the price varies greatly because of this. Most ETF trading takes place in-kind and securities are not sold for cash. ETFs always trade close to their fair value and time of the day. ETFs are more tax efficient than mutual funds and don’t have an investment minimum or sales load.
In a very similar way to stock market ETFs, cryptocurrency exchanges also have ETFs but for crypto-assets like digital tokens. Cryptocurrency ETFs are owned by a custodian bank that issues shares to investors. Cryptocurrency ETFs also trade throughout the day on crypto-exchanges and are subject to varying price changes. The ETFs on the crypto-exchange own the digital tokens that they track and people who invest in those ETFs indirectly own part of the tokens as well. When the tokens perform well, investors earn a share in the profits.

The benefits of ETFs for cryptocurrency

More and more people who are interested in investing in cryptocurrency are considering ETFs in light of digital wallets and exchanges being hacked. Investing directly in crypto token always has the risk of tokens being stolen and all funds disappearing. ETFs, on the other hand, are supported by a custodian cryptocurrency bank. Because of the involvement of a bank ETFs are better protected against theft and complete loss of assets.
In the current scenario, anyone who wants to invest in different types of cryptocurrencies needs to invest in each separately, own multiple wallets, and track each type of token individually. ETFs allow investors to own a share of a basket with different types of tokens that can be tracked and traded together. By buying an ETF share, investors can enjoy the profits from multiple tokens with a lot less effort.
Buying and selling of ETF shares give investors the freedom to trade on the crypto-exchange with relatively low risk. The custodian bank keeps the tokens secure, prices don’t fluctuate as widely as individual tokens, and like mutual funds, varied assets always provide a more stable investment.

Risks

The biggest challenge being faced by cryptocurrency ETFs eight now is that they are still in the early stages. There are only a few crypto-exchanges that offer ETFs to investors while others are still trying to get approval to launch. Because it is still early days, the theory of risk diversification has not fully been tested yet in the cryptocurrency world. While risk diversification works well in the traditional stock markets, how well this translates to cryptocurrency is yet to be seen.
There are still relatively few tokens that are used to make up ETFs with numbers ranging from six to ten. Small numbers like these don’t offer the types of diversity required to prevent risks as compare to traditional portfolios that give investors access to a much larger pool of securities.
While investing in cryptocurrency ETFs is relatively safer than directly investing in digital tokens, the undertaking is still in the early stages. It might be advisable to wait and watch the crypto markets for a while before diving into the crypto-ETF pool.