Understand the risks before considering the benefits. To understand what you can lose, think about what you can gain.
Demand for real trading determines the true value of cryptocurrencies, which leads to demand for asset storage and speculative demand for making money.
It is your understanding of the world that determines the success or failure of long-term investing. The key to investing is having the right worldview.
Blockchain cryptocurrency has been a hotspot in the global financial market since 2017. As of December 31, 2017, the total market value of all blockchain cryptocurrencies has increased by more than 30 times compared to January 1, 2017. While many people have invested in blockchain and became rich overnight, there are also many who regret not investing or missing out on the market. Many of my friends ask me how to invest in this field. I think we need to talk systematically about this.
danger
Blockchain investment is a kind of investment with risks and benefits. Let's talk about the risks first, then the benefits. Because you need to understand the risks before considering the benefits. Because you have to understand what you can lose and think about what you can gain.
When considering the blockchain market, you must first understand it. Blockchain is a voluntary and fully organized marketplace by the private sector. It is a semi-separated market from all state control. It is a market that is rarely overseen by the state. This characteristic determines many properties. For example, there are no opening and closing times, no price restrictions, no national mandatory listing standards, and no penalties for insider trading.
In other words, all state-imposed rules for markets do not apply here. In this market there are only the rules set voluntarily by the creators of the market rules and those who agree to these rules and voluntarily participate in the game. In other words, the blockchain cryptocurrency market has replaced government rules with private rules and national laws with private laws.
This means that the things previously established by the state no longer exist in the world. For example, state-led capital markets have a market access system and a market supervision system, and the state is responsible for investors. In the world of blockchain cryptocurrency, market access and oversight are carried out by civic groups. No one is ultimately responsible for your investment except yourself.
This is the decision. The risks of blockchain cryptocurrencies are very high. It can make you rich overnight and it can even make you zero overnight. Of course, there are “official” financial markets that are regulated by the state, and the risks are great. You can refer to the previous article "Why ICOs Replace IPOs?" ".
Blockchain and Crypto
For ordinary people, the concept of encryption is easy to understand. Encryption is the conversion of a string of information into a password. Blockchain is much more difficult to understand.
We can understand the blockchain as a series of records. For example, when playing mahjong, cash exchange is very cumbersome, so we ask the average person to keep an account, which is the so-called 'centralized recording method'. But there will be trouble in the middle: if this person secretly deducts himself an extra amount, we can't figure it out.
Blockchain is a kind of “decentralized record”. In other words, how can a book solve the problem of someone who secretly keeps an extra amount to himself? All four of us playing mahjong keep accounts. After turning 8 laps, adjust the account. If three accounts are the same and one person's account is different, the simple majority rule assumes that the three accounts are correct and excludes the other accounts. Then we tied the ledger at different points in time, the blockchain.
So, in the real world, who secretly keeps extra money for themselves? This is the central bank. The central bank and its sub-banking systems keep all of our ledgers, and if they wish, they can unilaterally put a lot of money into their accounts to plunder our real wealth. So, when we use blockchain in the currency arena, everyone maintains a ledger to fight the thieves of our wealth.
I own one bitcoin and the central bank also owns one bitcoin, and he and I cannot issue additional bitcoins. Other fields can be inferred by analogy. Blockchain makes each of us more transparent and equal in information.
Classification
Let's talk about the classification of blockchain cryptocurrencies.
The first category belongs to the currency category. Both Bitcoin Core (BitCoin Core, BTC or BCE) and Bitcoin Cash (BitCoin Cash, BCH or BCC) fall into this category. They are designed with a currency like simple technology, good liquidity, and high security.
The second category is public chains. A public chain can be understood as an open operating system based on blockchains such as ETH, EOS, etc. In this ecosystem, ETH and EOS are used as currencies.
The third category is applications. As the name suggests, there are actually some useful programs out there. For example, applications built on ETH and EOS allow each application to issue its own tokens.
The relationship between the public chain and the application is the same as the relationship between the mobile phone operating system and the application. If you're trying to develop taxi calling software, you can't start from the bottom of the phone. You need to develop based on Android or iOS. Android's counterpart is a public chain, and taxi calling software is an application.
price
What determines the price of cryptocurrency? Currencies vary by general trend, public chains by community, and applications by team. This is determined by various market capabilities. The BTC plate is so large that few have the power to change the market. The public chain changes depending on the size of the community, the amount of development and adoption, and even some level of news. At the application level, its value is more likely to be manipulated by a small number of people, such as teams or dealers.
The price of cryptocurrency is affected by several factors. One is that people all over the world are using it to buy and sell real goods or services. The second is a means of saving wealth because someone actually uses it. The third is that because of the wealth effect, many consider it an object of speculation and create speculative demand. Therefore, the price of cryptocurrencies is periodically affected.
But these three requirements: demand for actual trading, demand for asset storage and demand for speculative monetization, which is more fundamental and which one derives? I use a picture to illustrate this problem.
Demand for real trading determines the true value of cryptocurrencies, which leads to demand for asset storage and demand for speculation to make money. While the demand for asset storage and the demand for speculation to make money will result in a greater price increase than the demand for actual trading, that order is irreversible. This is why we say that the long-term factor that determines the value of a cryptocurrency is its fundamentals.
We need to remind you that this is not to say that you need to invest right away. After systematically learning the relevant knowledge, it is a good idea to use a portion of your income to buy little by little and try them out. Do not invest all your money recklessly in the first place.
investment idea
Where to buy? Recommend multiple exchanges. One is coinex ( https://www.coinex.com ) and the other is bitasia ( https://www.bitasiaex.com ). You may need to go online scientifically.
A key question about investing is what to buy? When to buy? Investment timing is very important. The consensus of the entire monetary circle since late 2017 is that we are in a bear market. So whether today is the beginning of a bear market or the end of a bear market, none of us know. We must rely on analysis, not on impulse. In investing, impulses fail. Therefore, investments are very demanding on the character of a person.
How to analyze the market? All investments, whether stocks, real estate or cryptocurrencies, basically depend on three bowls: basics, news and technology.
The basis is the genes of the coin. EOS, for example, is a political system born out of a democratic oligarchic republic of the US government. BCH is an economic system born out of the revolutionary nature of Bitcoin's natural market base. Thus, different understandings of the structure of human society brought together people with different temperaments for different currencies, and these people used different ways of playing, ultimately leading to success and failure.
BTC is the most popular in the entire blockchain world with the highest market value and benchmark status. Like America in the world economy, the US economy is good, and the world economy is good. The US economy is poor and the world economy is poor. BTC can almost determine the general trend of the entire cryptocurrency market. However, there are some problems with the basics of BTC, too, just as the US economy is deeply hollow, threatening the world with force and struggling to support the Treasury and dollar issues.
In a nutshell, BTC’s core development team limits the block size on the one hand and adds a few things outside of the blockchain, such as Lightning Network and Segregated Witness on the other, that deviate from the whitepaper. So, if we define Bitcoin as “a peer-to-peer cash system that complies with Satoshi Nakamoto’s Bitcoin whitepaper,” we can see that BTC is no longer Bitcoin and BCH is Bitcoin.
The news aspect is also very important. Short-term trends are often influenced by news. For example, a few days ago Goldman Sachs, a Wall Street investment bank influencing and gaining power in the US political landscape, appointed a new CEO David Solomon. This 56-year-old Jewish amateur electronic dance music DJ has a very positive attitude towards bitcoin and other cryptocurrencies. After the news of Solomon's appointment went public, the entire cryptocurrency market showed a strong trend.
But no one is god and can't exhaust all the news in the world. Changes in this world often happen quietly. No matter what news is available, all aspects of things are reflected in the price. So we have to look at the technical side. You should look at the K-line, moving average. This is because price is the attitude of market participants voting with real money. This statement will be influenced by emotion, but it is more true than empty news.
So Fundamentals, News and Technology are tools for market analysis. However, news and technical aspects often affect the demand for hype to make money. For those who believe in the long-term value of cryptocurrencies, the basics are paramount. So long-term investors need to look at the fundamentals and short-term investors need to look at the news and the technical side.
The most lucrative investment is to look at the value and growth space of one thing when not everyone is optimistic, or when everyone is optimistic about one thing, and identify the fatal problem with this. So it's not news or technology that determines the success or failure of long-term investing, but our understanding of the world. The key to investing is having the right worldview.