Considering Cryptocurrencies

February 21, 2017

Investors are always on the lookout for new ways to capitalize on the market, and digital exchange is currently open for investment. But what is cryptocurrency and how can we evaluate the risks and rewards of buying in?

First, a definition: cryptocurrency is simply a monetary medium of digital exchange. Unlike standard paper money, however, cryptocurrency is designed to decrease in production over time, in line with the currency’s market cap. And, without a centralized agency to print more, there isn’t a risk of inflation devaluing the investment.

The first cryptocurrency introduced to the market was Bitcoin, making its debut in 2009. Today, there are hundreds of other cryptocurrencies. In fact, the rapidly evolving digital economy generates more cryptocurrencies and associated tools each year, with Initial Coin Offerings making a splash in the exchange.

So how can we evaluate potential investment opportunities to ensure high quality standards of companies raising funds on the ICOs and prevent losses? Up until recently, investors had to do their own due diligence through piecemeal information, using company websites and discussion forums to gather clues regarding cryptocurrency validity and risk.

Now, corporations such as Ambisafe Inc. and rating agency ICOrating are providing guides to help investors make informed and reasoned decisions as they consider startups. Evaluations consider the technical features of the platform in question, the business model and market niche, the team and business experience in the blockchain industry and development, potential pitfalls or advantages tied into the decentralized infrastructure and other factors like the quality of the source code and analysis of community feedback. Through these assessments, the rating companies are developing a benchmark to objectively evaluate risks and create a clear picture of the investment potential.

While this new business model certainly entices investors with opportunities for significant dividends, the young market still holds significant risks for the participants due to the lack of reliable standards and business transparency. Investors should move with caution as they keep an eye on new trends in the cryptocurrency segment.

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