At the annual economic report hearing in the US Congress, last year was named the year of cryptocurrencies. Payment means based on decentralized systems broke into the global economy and are not going to leave there. Even the top financiers of the GXNUMX, gritting their teeth, are slowly admitting that cryptocurrencies exist and will have to be reckoned with.
So what happens on the market, which of the cryptocurrencies can be considered the most promising, and which investment strategies should you choose?
What happens in the cryptocurrency market
The winter of 2017-2018 was a period of turmoil for the crypto market. The growth of the bitcoin rate, which began in the fall, was replaced by a sharp decline - from $ 20 thousand dollars per coin to $ 8 thousand, or even less. The phenomenon, which at first was called a short-term course correction, dragged on for two months. Investors who had already been asking the price of luxury real estate fell into depression.
Their gloomy sentiment only intensified after Google, followed by other search engines, Facebook and Twitter, announced plans to ban ads for cryptocurrency services. News from China, where the interference of the authorities in the work of the crypto market reached the point of banning accounts in messengers, was also not encouraging.
But the last G20 summit breathed new hope into the market. The conservative head of the Bank of England Mark Kearney, who is also a member of the G20 Financial Stability Board, admitted that cryptocurrencies do not pose a threat to the global financial system. Consequently, there is no need to be afraid of either a direct ban on cryptocurrencies or a rapid tightening of the crypto market regulation.
Market participants prepared for a new rally and meticulously research the main cryptocurrencies in order to understand which of them will bring the maximum profit.
Five leaders of the crypto market
The favorites of cryptoinvestors are traditionally considered to be currencies with high capitalization and liquidity, which have been existing on the market for several years. Which ones cause investors interest in 2018?
1. Bitcoin
Cryptocurrency number one. King. The foundation and engine of cryptoeconomics. Yes, it has a ton of disadvantages, including slow transactions and high exchange fees. Yes, it collapsed from twenty thousand dollars to eight thousand for one coin. Yes, some eminent analysts call it a bubble and predict an imminent collapse. Despite all this, even now, during the recession, the Coinmarketcap aggregator reports that every third transaction on the crypto market is a transaction with bitcoins.
His market capitalization now, in the spring of 2018, it is about $ 139 billion. Not enough for the king of cryptocurrencies, of course, but the market is waiting for growth. Therefore, Bitcoin is being invested and will continue to be invested.
2. Lightcoin
Another elder of the cryptocurrency market. In 2011, Charlie Lee, the creator of Litecoin, introduced it as a lightweight version of Bitcoin. Hence the name.
Although litecoin has been in considerable demand all this time, and in April 2018 it ranked fifth on the list of cryptocurrencies with a capitalization of $ 7,9 billion, the current situation is not very favorable for it.
Besides the general decline in the market, there are also individual reasons. Charlie Lee sold all of his coins in December 2017, causing a temporary drop in the exchange rate. Some investors remained loyal to Litecoin, mainly due to the fact that in February 2018 the launch of the Litepay payment system on the same platform was announced. However, the launch is postponed indefinitely, so there is no reason for the growth of the rate.
3 Ethereum
But Ethereum is not so easy to shake. Behind this currency is not only an idea, but also a service, the demand for which is growing. Ethereum is a popular platform for decentralized systems and smart contracts. Roughly speaking, everyone can release their tokens, but this will require a platform, just as a computer program needs an operating system. And Ethereum is just such a case.
Therefore, it is called cryptocurrency # 2, and the capitalization of Ethereum at the beginning of 2018 reached $ 88 billion (in April - $ 53 billion). In 2018, Ether is predicted to grow, but now its rate is trying to enter a correction along with the entire market.
4. NEO
Lightcoin was intended to be an alternative to Bitcoin, and NEO is a kind of counterpart to Ethereum. This is a smart contract platform developed in China.
In the cryptocurrency market, the Celestial Empire is a very serious player, not least due to its mass character. Even before the government bans began, NEO had already signed a partnership with the largest wholesale trading platform, Alibaba. If the supply of goods from China is carried out using smart contracts, it will be difficult for this tandem to compete.
Now, the prospects for the NEO currency depend on the actions of the Chinese authorities: they seriously take up the cryptographic bans and prohibit everything that they cannot nationalize.
If the rumors are confirmed that NEO owners have connections in the government, they will be able to “run between the drops” and not get under repression. Then, the prospects for this currency are the most optimistic - especially if we consider that, in terms of functionality, the NEO platform, in my opinion, is more perfect and more accessible than Ethereum.
5. Altcoins
In general, all cryptocurrencies are called altcoins, except bitcoins. So the lightcoins mentioned above, NEO and Ethereum are also altcoins. But this trio confidently breathes in the back to the Bitcoin leader, but the further list is updated at such a rate that it is difficult to single out a single favorite.
Popular altcoins may have different characteristics, one thing in common: the momentary interest of the market to these assets provokes a rapid growth of their rate.
The market of altcoins in 2017 year expanded, but part of the "supernova" managed to evaporate, not meeting expectations. Therefore, we summarize in this paragraph all prospective assets that are not included in the list above. On an equal footing there could be EOS, Monero, Cardano, IOTA, Stellar and others.
How to use all this knowledge to your advantage? You can become a cryptocurrency investor.
Cryptocurrency investment strategies
Depending on the volume, frequency and timing of transactions, investment strategies are divided into three types:
- aggressive
- Moderate
- Conservative
There are no clear boundaries between them, and the same investor can use different approaches to the same asset.
With an aggressive strategy, the investor's task is to get the maximum profit in a short time on the rate jumps. Let's say the crypto market is waiting for important news to be released, and there are assumptions that after that the rate of the selected asset will sharply move in a certain direction. The investor makes a profit on the difference between the "before" and "after" rates. The disadvantage of an aggressive strategy is high risk, as well as the fact that, in fact, this is not an investment, but speculation.
With moderate strategies, the investor expects to make a profit after a certain time, for example, in a few months. For this, it is not enough to rely on a jumping course; it is necessary to study and analyze in detail the prospects of the chosen currency.
Large investors with solid capital, experience and market knowledge, as a rule, do not limit themselves to one type of strategy. Usually they form a portfolio of different assets, and each one has its own approach.
What does a cryptocurrency investment portfolio look like?
In the financial and investment dictionary, the term “portfolio” is not related to leather goods. A portfolio is a few assets with which an investor operates. Investing in different assets is needed to reduce risks: if one of the assets in the portfolio starts to suddenly fall in price, the rest will help to partially or completely cover the losses. This is called hedging.
In the vast majority of cryptocurrency investment portfolios there is one or several leading currencies. A year ago, not a single serious portfolio managed without a substantial share of Bitcoin. But the emergence of new Altcoins and the natural disadvantages of the flagship cryptocurrency reduce its investment attractiveness.
Bitcoin still holds a strong position, but its share in the cryptocurrency market is gradually decreasing. This is due, firstly, to an increase in the volume of Altcoin trading on the market. And, secondly, the emergence of cryptocurrency with a greater than Bitcoin functionality and more advanced applications in cryptomere. Our analysts believe that in 2018, even though bitcoin will remain a strong market figure, more practical altcoins can push it.
- Aleko Sokurashvili, Lead Analyst, Crypto Art Cryptocurrency Fund.
Leading cryptoactives are well suited for a moderate and conservative trading strategy. This means that transactions are opened for a long term, which depends on the results of the analysis of each asset. With this approach, short-term rate jumps do not interfere with taking profits at the scheduled time.
The fall of the lightcoin rate in December 2017, when Charlie Lee got rid of his share, is a good example of market force majeure, which could not be predicted using analysis. But after him the course was restored, and those investors who did not begin to sell lightcoin in a panic did not suffer from this jump.
What else you need to know, if you invest in a crypt? By the way, every cloud has a silver lining: in pairs of twin currencies, such as bitcoin and lightcoin, in such situations, some investors instantly switch from one to another, which affects the rates. If you have such a pair in your portfolio, you can thus compensate for the sudden losses in the medium-term strategy.
A pair of Ethereum and NEO are also twin currencies, their rates usually change synchronously, since the general market factors influence them equally. And in the absence of insider information about possible jumps in their courses, investing in them is also better conservative.
But to try to break the bank on a risky deal is best with Altcoins, which are not included in the top 20. Of the several thousand cryptocurrencies, the investor chooses the one that is now widely known, and is trying to turn a few cents into several thousand. Sometimes it even succeeds. The main thing is not to take such a risk with the latest or other people's money.
The main thing: do not invest all the money in one asset
Popular wisdom says: "Do not keep all your eggs in one basket." This is a comprehensive definition of portfolio investment. Whatever strategy you adhere to, investing all the money in one asset is too risky, especially on a volatile crypto market.
And if you have already collected a balanced investment portfolio, remember: it is better to rely on long-term strategy on large assets, and you can trade aggressively with brand new altcoins so as not to miss a profitable moment.