Are ICO's and Cryptocurrency Safe Investments?

Cryptocurrency 25 Sep, 2018

It was close to a year ago when I got started in cryptocurrency investing. I still remember all of the buzz. My brother and a bunch of friends were involved in mining Ethereum or Bitcoin. It was exciting times seeing people become Bitcoin millionaires!

The first story that I stumbled upon was about a guy named Peter Saddington. He was involved in Bitcoin early on and ended up buying a Lamborghini for about 45 Bitcoins. The amazing thing is that he started buying Bitcoin in November 2011 for $2.52 each!  At the time of the NBC news article, his return was about 321,000 %!

FOMO - The Fear of Missing Out

So I sold myself on the idea of buying Bitcoin, Ethereum, Litecoin, Ripple, and a half a dozen other coins. It was the whole idea of FOMO (fear of missing out). I was thinking, "What if I could become a Bitcoin millionaire too?"

So my wife and I started investing in cryptocurrency and what we realized a month later is that - we missed the bus! The market started crashing and there were sites like selling the hype. Even if the market crashed, there were a bunch of articles mentioning the "HODL" concept of holding your crypto coins instead of selling them.

So here I am, roughly a year later HODL'ing my coins. Since then, my investments have decreased by over 75%.

Blockchain and ICO's

The other day I was reading an email from a very popular cryptocurrency strategist mentioning that it's now all about the blockchain technology. So instead of looking for the next coin to invest in, look into the companies that are coming out with the technology that will lead the path for financial transactions.

The article was all about initial coin offerings (ICO'). 

Last year, I remember a bunch of ICO's all of the forums and crypto sites. 

In some ways, it seemed like a joke. People had forks (their own versions) of Ethereum and other open source crypto. For example, Dogecoin was originally launched in 2013 as a parody coin. The website launched with a splash page with a dog and a bunch of comic sans text (one of the ugliest fonts ever).  It seemed as if there was some FOMO going on after seeing this parody coin hit a $2 billion market cap in 2017.

Are ICO's and Cryptocurrency Safe to Invest In?

I know that I've mentioned a lot from my own cryptocurrency experiences, but I've seen some recent day trading success stories from my Facebook buddies. Of course, the same idea of buying low and selling high applies to crypto. So can you make money from investing in crypto? I guess it depends on how risk averse you are. 

Even though ICO's can be securities offerings, they are still less regulated than traditional capital markets.

Another thing to know about is that they are more susceptible to pump-and-dumps where investors can game the market.  What this means is that the price of the investment is artificially inflated.  So when the buzz goes around, a bunch of investors will jump on the bandwagon and invest.  On the other end the scammer that sees returns skyrocketing and then sells at the inflated price.

With traditional, regulated investments, pump-and-dumps are illegal. With a decentralized currency, there are more risks involved and that means there are more scammers out there praying on innocent investors.  

Will ICO's and Cryptocurrency Ever Become Safe?

I believe that government regulators are tuning more into blockchain technology to create a safe experience for investors. On 1 side, it looks like it's great to have a regulated marketplace for cryptocurrency. On the flip side, it somewhat defeats the original intent of cryptocurrency - to be a decentralized currency, free from corruption. 

If you'd like to learn how to create long-term sustainable wealth, check out my top wealth creation strategies.

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