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Part 1 | The Crypto-Compass – Your Compass 2 Success

The Crypto-Compass – Your Compass 2 Success

With the blockchain technology, investment opportunities are created in a market which is already worth billions – the market for crypto sciences. We created now for you the Crypto-Compass, the first exchange newsletter for digital currencies, we summarize the most important news every month and provide exclusive assessments on market developments, innovations and upcoming ICOs – always critical and independent.

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First of all, what are crypto-investments? Let’s classify the term, because crypto investments are much more comprehensive than they sound at first. Under crypto-investments we mean the following categories:

1. (Active) Trading

Aimed at gaining profits over the margin between purchases and sales by trading cryptos. This makes it only slightly different from trading with Fiat currencies. Only the regulatory aspects, market places and storage are different.

2. Investment

Long-term investments in cryptos that target price increases. Bitcoin is bought, similar to gold, in order to keep it in the long term and more or less passively an asset building.

3. Asset Protection

It is controversial to call this form a real investment. Much more is to keep your money without any direct intention to build up your assets or profits. Reasons for this are, for example, the protection against regulatory interventions in Fiat Money. Those who want to protect themselves against impending inflation may shift their assets beforehand into less inflated investment forms.

4. Funding

With the funding and financing, of new projects, one aims at large profits with i.d.R. higher risk. Crypto-fundings mostly include block-based projects. The founders collect money through crowdfunding campaigns to finance the development and usually offer shares in future profits. As a rule, so-called ICOs (Initial Coin Offerings) are carried out in cryptosystems, Investors have the opportunity to first purchase the tokens of the currency and sell them later possibly profitably. With the revenues of the Crowdsales / ICO’s the development is to be financed.

5. Specific Investments

This category includes all investments that are dependent on the system. For example, bitcoin mining can be seen as an investment by investing in hardware, which is then used to feed computing capacities into the network and receive remunerations. Mining is possible in the case of proof-of-work algorithms, while in the case of proof-of-stake algorithms, a high amount is inserted into the system and thus the right to confirm transactions. In the case of Dash, for example, one would set up a node, place a fixed set of tokens there, and receive remuneration for it. The five categories described here are the abstract classification of crypto investments into individual asset classes. 

 

Part 1: How do I find profitable crypto investments?

1. Funding: Finding lucrative projects

The fundings are aimed at financing new projects / companies and are therefore at a higher risk. On the other hand, it is hoped for higher returns and extreme increases in value. Just because the projects are new, the information effort is above all high. Key figures, structures and team members must be analyzed in order to gain an accurate picture of the project.

“A good team on the way to the wrong direction is just as ineffective as an unorganized team with a grandiose idea.“

A special form of funding is ICO’s. The Initial Coin Offerings offer, analogous to the IPO at the stock exchange, the opportunity to purchase as an investor in the initial phase Coins directly from the developer team. It is not to be underestimated, however, that, in particular, because of the current hypes, many investors have gotten from the potential wind: Black sheep line up in the ICO’s, with strange ideas try to collect a lot of money quickly in a short time and only provide coins that under certain circumstances can never be used because the project is not implemented.

So keep in mind: ICOs are generally much more risky than investing in existing and widespread currencies because it is not certain whether the currency will ever be accepted.

2. Other Investments

Anyone who makes light-hearted investments will quickly write red numbers. Therefore, for this category, it is important to keep up to date with the latest knowledge. There is no uniform platform, such as a stock exchange on which investments can be made centrally. In order to set up a Dash master code, for example, one should also understand the technology behind Dash and the meaning of the master code as well as the compensation structure in order to make an informed decision.

Mining is rarely attractive to private individuals today. While some years ago it was still profitable to run its own machines in the living room to mine Bitcoin and Co., large investors are taking advantage of the yield, making the mining of existing currencies increasingly unattractive.

3. Long-term Investment

If the main focus is not only on short-term speculative gains, but also on long-term investment in crypto-nutrition, the following factors should be considered:

Acceptance

Regulation

USP – Cryptography A) from other systems, and B) from other cryptos

 

Diversification: The ultimate

At this point, the importance of diversification is also mentioned. While some investors adhere strictly to the theory of investing in a small number of investments, the majority advises to diversify their portfolios, in other words, to spread investment sums on different projects or investment forms. This is intended to minimize the risk, e.g. strong fluctuations of a specific currency can be offset by other currencies in the portfolio.

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