These are indeed heady days for investors in cryptocurrency, and with fortunes being made (and lost) rapidly, it’s easy to forget the difference between “price” and “value.” Many investors are focusing on the quick flip--they buy the “hottest” ICO and hope to immediately sell for huge profits once the crowdsale is over.
There’s nothing wrong with that approach, per se, and some have been highly successful. However, it’s much easier and more certain to make profits by buying and holding, and in that case, investors need to clearly differentiate between a token’s price and its value.
Many tokens and currencies represent great projects that have huge potential. Some of them stand to disrupt the traditional ways of doing things, possibly bringing large profits in the future. As investors begin to come to grips with the fact that the days of flipping ICO tokens are fading away. Quick profits need to give way to long term potential.
Investors need to ask themselves the current and potential value of the projects they evaluate. The quickest way to lose money is to buy an overpriced token that has little potential and therefore low value. On the other hand, investors with enough foresight to purchase the woefully underpriced Bitcoin (or quality altcoins) last year have seen massive returns. The need for research and proper vetting of a team’s business model cannot be overemphasized.
It is important to understand what will drive demand for the token in the marketplace. This requires an honest, unbiased assessment of the project. Many projects require an idea to be perfectly executed in order to succeed, and investors should consider that perfection occurs only rarely in this world.
Market factors such as an increase in crypto adoption will come into play at some point. This remains in the future, however, and isn’t certain. Investors shouldn’t settle for a project whose token’s value is hinged purely on speculation. Neither should they be carried away by hype.
Investors a need to look beyond the commonalities of tokens and focus more on each project’s unique proposition. The moment a new project starts copying from existing ones, investors should take a step back. Investors do not need to follow other investors without knowing why they are putting their money into a project. Each investor must dispassionately assess the current and future value of any project in which they invest.