The main challenges of crypto investing and how to tackle them
Financial investments are the most lucrative way to increase income, but they don’t come without risks.
Until recently, term deposits or savings accounts were the go-to options, but lately, alternatives such as crypto coins (Bitcoin, Ethereum) have been considered.
Their popularity is proven by the size of their market, which currently reached $3,000billions, according to CoinGecko.
Despite this, the crypto market is more volatile than the classic stock market. This year’s May correction is a clear example, as investors suffered total losses of $830billions, as shown by Economic Times. Even though crypto has become mainstream, those passionate about it and the retail investors are lacking a solid knowledge foundation when it comes to this new industry. As it’s a free market for all, the newcomers face many challenges. Iustina Faraon, CEO and co-founder Coreto, the first reputation-based social platform for crypto communities, provides an overview of the investment risks and how to tackle them:
Crypto investors have to do it themselves
When you invest in stocks you can work with a certified, professional broker, who knows the industry inside and out and can offer advice, whereas in the crypto market the investors mostly have to do it themselves.
Although many started trading since 2017, when crypto coins, Bitcoin and blockchain became well-known, and managed to earn significant amounts of money in a short window of time, they don’t represent the majority.
Those without training placed their bets by following the advice of third parties, learning important lessons at their own expense about how not to do it.
There are very few online resources
The more thorough investors, who allocate time to online research, suffer from the lack of resources. There are many groups on social media or platforms such as Telegram, Discord, Reddit, Twitter, blogs and niched forums, but the information isn’t centralised and this causes confusion. There’s a constant need to research, to look into the market sentiment, recent and future events and anything else which could influence the value of the coins. Everyone has limited knowledge about the subject and can’t rely on a trustworthy platform for all the due diligence.
The crypto influencers entered the market
Since 2017, more and more influencers have emerged in the crypto space. During the bull run, when everything was on the rise, they were promoting other projects, with or without being paid by the founders. When the bear market started in 2018, the majority of them disappeared, leaving behind people who lost significant amounts of money because they listened to them. In 2020, more crypto influencers joined, following the same pattern: a lot of noise but little knowledge.
The content shared by the influencers was spread out on various platforms, including Twitter, which facilitates a quick interaction with the community; Telegram/Discord, favoured for the direct discussions; their own blog or a Medium profile, which can be under their control; private groups that monetise the buy/sell signals and marketing partnerships which increase their exposure. In this context, some people took on an influencer role, issuing wrong predictions. They were either paid to mislead, or ventured to place losing bets as they didn’t have enough information. In both cases, they then erased their online tracks. This still happens to this day.
Significant time and resources invested
To make a profitable investment, it’s important that all users travel on the same information superhighway at the same time. The whole process can be a very difficult, lengthy and frustrating process, especially if the person involved has a low risk appetite.
Iustina says, “After all, the difference between traders lies in their behaviour during the bear market, when the trust levels are low and the prices drop, and those that master the technique can increase their portfolio. When the trend is in bull run and the crypto value is on the increase, that’s an easy win. You mainly need to hold on to your winners and know when to take the money off the table.”
“While institutional investors and experienced traders can make use of all sorts of tools and analysts, the retail investors can’t access professional guidance. This was our main motivation for launching Coreto, a reputation-based platform for the blockchain industry. This way, influencers and traders can prove their knowledge and pay more attention to their analysis and recommendations, as users can keep track of their performance.
When their reputation score increases, they become the analyst team and the researchers of the retail investors. Coreto contributes significantly during the bull run moments and becomes the main source of information in the bear market, establishing a healthier ecosystem.”