If you had blindly invested about $12,000 in every Initial Coin Offering (ICO) launched in recent years, including the ones that failed, you’d have made a cool 13.2x return on your investment, according to a report published by VC firm Mangrove Capital Partners.
The report, which used data from a collection of 204 ICOs that either failed or whose tokens are currently being traded on exchanges, highlights why the cryptocurrency market is one of the most lucrative places to invest.
Like every good investment opportunity, however, the crypto market also comes with its dark side. Much of that has to do with the high number of unknowns in the crypto world, a fact that has seen investors losing millions in virtually every corner of this evolving platform.
In fact, crypto investors lost $670 million to scams and hacks over the first quarter of 2018 alone, bringing the total to about $1.7 billion lost from 2011 to 2018.
Still, that doesn’t mean the crypto market isn’t a good place to invest. It just means investors must get smarter. Away from hacks and scams, crypto investors must accurately gauge their risk appetite and desist from making emotional crypto investments – a big factor considering the highly volatile nature of crypto markets.
Be Wary Of ICOs
ICOs have been a huge part of the crypto game.
Last year, startups used ICOs to raise in excess of $5 billion in funding, which was significantly higher than what early-stage startups received from VC firms.
And while some of these startups had valid products and services to excite investors, much of the success behind ICOs could be tied to blind enthusiasm from investors, which has contributed to the millions lost via exit scams and pump and dump schemes thus far.
This, however, doesn’t mean that you stay away from ICOs.
If you must include ICOs in your investment portfolio, it pays to be aware of the red flags. Any ICO that boasts extravagant returns, doesn’t have a credible team, lacks strong documentation, or comes with an obscure working model should immediately raise suspicion.
And irrespective of your risk tolerance, it’s always wise to limit your investment in hyped ICOs when building your crypto investment portfolio.
Discipline Is Everything
When renowned Russian crypto-scammer and fraudster of the MMM Global fame, Sergey Mavrodi, landed in Africa and launched MMM in Kenya, no one thought anyone would buy into his Ponzi scheme. With over $4 million worth of bitcoin stolen and significant jail time on his resume, however, Mavrodi managed to dupe thousands into buying Mavron, his custom crypto token, with investors losing millions when the pyramid scheme eventually crumbled.
This is just one among hundreds of stories around the world that depict the biggest threat to healthy investment decisions: the human factor.
No investment strategy can ever escape the human factor. Human emotion, beliefs, and biases often make up the biggest risk factor when investing, especially within hyped crypto markets.
When you go into any crypto investment that you don’t fully understand, overtrade, or put too much of your cash into penny coins, you’ll be easily setting up your crypto portfolio for failure.
By cultivating Warren Buffet’s ideology of investment discipline and strategy for your crypto investment, you can begin building a crypto portfolio that brings in profits long after your initial investment.
Go Long-Term
Long-term is a word that is rarely used in the crypto world. Most investors often come into the crypto game with the single mindset of buying and selling for short-term gain, which is understandable considering the highly volatile trading environment in the crypto world.
And while both strategies have their strong and weak points, long-term crypto investors can significantly increase ROI for their portfolios.
In general, markets have a tendency to drift upwards over time. For instance, the S&P 500 and FTSE 100 returned around 60 and 25 percent respectively over a 5-year stretch, proving that long-term investment portfolios often have decent ROI.
When building the long-term elements of your crypto portfolio, look out for key indicators of value. These include market share, transaction volume, technology developments, and utility value associated with your crypto of choice.
Finally, remember to bring it all in by mixing it up. Include different elements of the crypto game, that is, value, growth, and speculation by investing in some bitcoin or ethereum, alt-coins, and ICOs depending on your risk appetite.
A diversified portfolio will help you balance risk and guarantee a decent ROI from your crypto portfolio.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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