The idea of investing in anything that you have no idea about sounds absurd, and that is because it is. With this being said however there are many who have FOMO when it comes to cryptocurrency and so they are simply jumping onto any trend which they see becoming popular on social media. Experts in the industry like Robert Testagrossa however, are rightly warning people of the importance of knowing where they invest their money.
There are over 15,000 crypto coins currently on the market, giving a huge range of options to invest. No matter how much you plan to invest in cryptocurrency however, here is exactly why you have to ensure that you have properly researched the coin before parting with any money.
Because so many people are aware of the fact that investors jump onto social media trends, they are spotting the value of the amount of money they can make through a scam. What happens is that a very basic project is set up, usually based on a pyramid scheme, and then they float the coin on the market. Those behind the ‘project’ will then pay for a huge volume of bots to start commenting on social media, telling people to buy the coin. Then we see a huge influx of investors, the price gets pumped through the roof, and then those behind the project sell a huge amount of coins and the price dumps. Those behind the project win, whilst those following on social media are left with egg on their face.
There are also a number of projects which are either very poor or which exist for nothing. Take the Doge coin as a perfect example, this may have made many people money, but in the long run it harms the crypto space and it will leave people with losses. This particular coin is completely worthless and is not backed by a project, it is a coin that was made based on a meme, and nothing more. The price pumped because celebs touted it, but this will eventually dump hard, and many people will lose big money.
There are so many amazing projects out there which have simply reached the peak of their value and market cap, based on the way in which they have been created. The reality is that most coins shoot up in value in a few days or weeks after they launch, and then plummet. At best these coins then recuperate around 50% of their value, unless they are lofty and widespread projects which will eventually have the capability to broaden their overall market capitalization. The more that you investigate the more likely it is that you will be able to spot the true capacity for these coins and then you can make a smarter choice.
Having a risky punt on some coins is worthwhile, but you should always know just what you are buying before parting with your cash.