Crypto is a beast, an adrenaline rush at best. I’m not sure which has better odds of winning: any gambling game in Las Vegas or Crypto.
Do Your Own Research (DYOR)
There are numerous forum posts, Telegram pins, Discord messages, and articles advocating the importance of conducting your own research. It’s a valid statement. Instead of asking questions like “What’s a good coin to invest in?” or “Which coin will moon next?” delve into the projects and pose tough questions:
- What is the applicability of this coin or project?
- Does this project have enough support for mainstream adoption?
- Who is the team behind this project?
- What are the contract terms?
These are just a few among many questions to ask.
Investing in Crypto can be Similar to Angel Investing
Whether it’s the stock exchange, private equity, or investing in a lemonade stand, none guarantee the return of your money. Much can transpire between the time of investment and the realization of a return, such as regulatory changes, the owner absconding with funds, or the company going bankrupt.
Astute investors understand the plethora of variables involved. While expectations may be high for a multiple return on investment, these investors acknowledge that deals can sour rapidly. Crypto is no different. In fact, there are no clear-cut rules for transparency into business operations like those associated with registered securities.
When venturing into a crypto investment, not much is in favor of the investor. Many governments are clamping down on crypto investments to hold these projects accountable for luring investors with promises of high returns and diverting funds for other purposes. Recently, the Safemoon project came under scrutiny by the SEC for the way company executives withdrew funds from the company.
The BIGGEST Challenge
If you enjoy discovering non-mainstream projects and investing in them, the biggest challenge is staying updated on them. Discord and Telegram are the two primary communication channels for these projects. Forums like Reddit or the project’s website tend to host stale content. All the action happens within those chat applications.
Crypto also carries anonymity. Inside these chatrooms, people use usernames, not real names, and there are no email addresses provided. Messages are predominantly broadcasted, with two-way conversation limited to specific areas. Do not expect email updates on project progress. Instead, be prepared to sift through hundreds or thousands of Discord messages to decipher the latest project status. If you’re away for more than a few days, you’ll quickly lose track.
Registered securities tied to companies allow us to monitor their performance daily. We buy their stock and hold it for a certain period, employing a set-and-forget strategy. Crypto doesn’t function in the same manner.
If a project is hemorrhaging money and failing to generate significant interest, it can abruptly cease without prior notice. In a different scenario, a project may launch, solicit investments, and subsequently prohibit withdrawals.
For undesired projects that do shut down for any reason, investors might find it challenging to “sell” their tokens to realize capital losses and may become stuck holding hundreds or thousands of useless tokens.
Primary Takeaway
Conducting your research is crucial, but bear in mind this perspective: If a project closes and you fail to retrieve your investment in time, realizing a capital loss may not be straightforward. No tax writeoff and you’re out of money.
