Investors today are presented with a huge and confusing array of cryptocurrency choices. All are subject to the general limitations and risks presented by cryptocurrency investing, and some present particularized concerns above and beyond the standard risks. In this article, Rory Brown, Lydian founder discusses some of the ways to make informed investment decisions regarding cryptocurrencies.
Individual cryptocurrencies are designed and produced by companies that operate in many ways as typical tech startups. They use blockchain technology to address specific problems and consumer needs. Just because a coin company has come up with a form of a digital coin does not automatically mean that users will find the coin useful or that it will gain value over time.
Look at what a particular coin is designed to do, in the real world, other than simply be another coin option. Determine whether a coin is dedicated to a particular purpose. For example, Bitcoin centers on security provided by the unchangeable blockchain ledger, while Ethereum is intended to easily facilitate digital agreements directly between remote users. Coins that are based around unusual products and projects, and that do not translate to a real-world need in an obvious way are much less likely to stand the test of time and user demand.
New cryptocurrencies often appear to be based entirely on existing coins and technology. Examine whether the company issuing the coin has improved on existing processes in ways that make the coin competitive among users looking for more efficient cryptocurrency for their particular needs. Look carefully at the background and experience of the team members of a company developing new cryptocurrencies. They should be a diverse group of people with technical skills as well as a team of effective marketers and promoters for the highly competitive digital coin environment. Check the project members’ success in promoting their coin in relevant communities. Updates on social media and corporate blogs regarding the project often reveal the level of excitement and interest among potential and already dedicated users.
Understand that any cryptocurrency will only become highly valuable over time if it becomes both an effective store of actual value and an accepted medium of exchange in and among the market participants it is designed for. Market share among competing cryptocurrencies has been fluid over the years, with Bitcoin maintaining a majority market share, even as its value has fluctuated by several factors both up and down recently. Based on the totality of circumstances, an investor is challenged to determine which digital coin platform is best suited to solve its intended problems while gathering the most loyalty among users.
Like almost all investments, evaluating different cryptocurrencies eventually boils down to a series of subjective choices. Considering the primary purposes and uses of successful digital coins is the best pathway to making informed subjective decisions about a particular cryptocurrency’s prospects for success in the evolving blockchain environment. A complete understanding of a cryptocurrency’s purpose and the people who created it is the best source for a good investment decision.
About Rory Brown
Rory Brown currently serves as a Managing Partner of Nicklaus Brown & Co. and was a co-founder of VirtualBank in 2000. VirtualBank began as an early adapter of technology creating platforms and interfaces for customers of financial institutions to access financial accounts and records through the internet. VirtualBank has grown to be a multibillion-dollar company, named “Best Online Bank” by Money Magazine.
Rory Brown is also the co-founder of Lydian, which garnered him recognition by Ernst & Young as Financial Service Entrepreneur of the Year. Mr. Brown received a Master of Business Administration from the University of Charleston and is a Certified Public Accountant. He has focused on financial technology and investment management for over 30 years. In his spare time, Rory Brown studies the history of the Lydians, the first people to use gold and silver coinage.
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