Brand-New Cryptocurrency: How To Invest Wisely

Investing in brand new cryptocurrency is a risky business. With thousands of new projects released every year, only a handful will deliver on their promises.

If you're thinking about investing in a brand new cryptocurrency, it's important to do your due diligence. Research the team behind the project, check for partnerships with established companies, and read online communities' thoughts on the project.

Look for a comprehensive white paper that outlines the project's objectives, technology, and roadmap.

Be wary of anonymous teams (unless it's a meme coin) and poorly written or incomplete white papers.

It's also a good idea to diversify your investments and only invest money you're willing to lose.

Some of the newest cryptocurrencies on the market include Bitcoin Minetrix, Meme Kombat, TG.Casino Token, and Wall Street Memes.

Understand the risks and volatility of cryptocurrency

Cryptocurrency is a rapidly growing market, but it is also an incredibly volatile one. Before investing in brand new cryptocurrency, it is important to understand the risks involved.

Firstly, it is essential to recognize that cryptocurrency is not intrinsically valuable. Unlike traditional assets, it is not backed by physical commodities or the guarantee of a central bank or government. Instead, its value is based entirely on speculation and how much people are willing to trade for it. This makes it a highly speculative investment, subject to rapid and unexpected changes in market sentiment. As a result, the price of cryptocurrencies can fluctuate sharply and suddenly, sometimes dropping by thousands of dollars in a single day.

Secondly, cryptocurrency is still a relatively new concept, and it is constantly evolving. This means that it is subject to regulatory changes and government interventions that can significantly impact its value. For example, in 2021, China's government and central bank announced that all cryptocurrency transactions were illegal, causing a drop in Bitcoin's price. Regulatory changes can also affect the tax consequences of using and investing in cryptocurrency, further adding to the volatility.

Additionally, cryptocurrency is susceptible to technical glitches, human error, and hacking. There is no perfect way to prevent these issues, and they can have significant financial implications.

Furthermore, the success of a cryptocurrency project depends on its adoption by the crypto community. This means that even a project with innovative technology or a dedicated team can fail to gain traction and may not succeed. As a result, investing in any cryptocurrency, new or old, carries the risk of losing your entire investment.

Lastly, the fear of missing out (FOMO) is a significant driver of volatility in the cryptocurrency market. Investors are afraid of missing out on big price movements, leading to panic buying or selling, which further contributes to the market's volatility.

In conclusion, investing in brand new cryptocurrency is a high-risk venture. It is important to carefully consider your risk tolerance and conduct thorough research before investing. Diversifying your portfolio and not investing more than you can afford to lose are also essential strategies to mitigate the risks associated with this volatile asset class.

Research how to spot scams

Cryptocurrency scams are financial frauds that take advantage of the anonymity and decentralised nature of cryptocurrencies. Scammers exploit victims' trust, lack of knowledge, and desire for quick profits. They often impersonate well-known individuals, influencers, or reputable projects to gain trust. They also create professional-looking websites or platforms that seem legitimate at first but are packed with malware that can steal personal information or digital currency.

• Fake cryptocurrency trading platforms or wallets: These fake websites often have similar domain names to legitimate sites, making it hard to tell the difference. They may operate as phishing pages to steal your login credentials and private keys, or they may allow you to withdraw small amounts at first and then refuse to honour larger withdrawal requests.
• Pump and dump schemes: Fraudsters hype a particular coin or token through email blasts or social media, causing a rush of traders to buy the coins and drive up the price. Once the price is inflated, the scammers sell their holdings, causing a crash and leaving other investors with losses.
• Fake celebrity endorsements: Scammers pose as celebrities, businesspeople, or influencers to capture attention. They may sell phantom cryptocurrencies to novice investors, using sophisticated websites and brochures that appear to show celebrity endorsements.
• Blackmail and extortion: Scammers send emails claiming to have records of adult websites visited by the user and threaten to expose them unless they share private keys or send cryptocurrency.
• Cloud mining scams: Cloud mining companies allow you to rent mining hardware remotely, but many are scams or ineffective, resulting in financial losses.
• Fraudulent initial coin offerings (ICOs): ICOs are a way for start-up crypto companies to raise money from future users, often promising discounts on new crypto coins. Criminals may go to great lengths to deceive investors, such as renting fake offices and creating high-end marketing materials.
• Promises of guaranteed returns: No financial investment can guarantee future returns because investments can go up or down. Be cautious of schemes promising high returns with little or no risk.
• Poor or non-existent whitepaper: A whitepaper is one of the most critical aspects of an ICO, explaining how the cryptocurrency is designed and will work. If the whitepaper doesn't make sense or doesn't exist, be wary.
• Excessive marketing: Heavy marketing, including online advertising, paid influencers, and offline promotions, is often used to reach as many people as possible in a short time to raise money quickly. Legitimate cryptocurrencies tend to have humble beginnings and don't need to spend heavily on advertising.
• Unnamed team members: Legitimate investment businesses typically provide easy access to biographies of key individuals and an active presence on social media. If you can't find out who is running a cryptocurrency, be cautious.
• Free money: Any investment opportunity promising free money, whether in cash or cryptocurrency, is likely to be fake.
• Pressure to act quickly: Scammers often create a sense of urgency or FOMO (fear of missing out) to pressure you into investing immediately without conducting proper research.
• Poor website design and security: Scam websites may have poor design, spelling errors, broken links, and a lack of proper security measures like SSL certificates.
• Unsolicited contact: Be suspicious of unsolicited emails, messages, or social media messages offering investment opportunities. Legitimate projects usually don't randomly contact individuals in this way.
• Negative reputation or reviews: Research the reputation of the project or platform online. Look for reviews, comments, and experiences shared by other users to identify potential red flags.
• Lack of community engagement: Legitimate cryptocurrency projects often have active communities and a strong social media presence. If a project lacks community engagement or seems inactive online, it may be a scam.

Remember to stay informed, conduct thorough research, and maintain a healthy scepticism. Never give out sensitive information unless you are certain the recipient is trustworthy.

Learn how to choose which crypto to buy

Do Your Own Research (DYOR)

Before investing in any cryptocurrency, it is important to conduct fundamental research on the project, its use case, its team and founders, its token economics, and the underlying technology. White papers, commonly found on a startup's website, can be a good source of information. They often outline the digital asset's unique selling points, use cases, and roadmap for the future.

Focus on Long-term Opportunities

When deciding which cryptocurrency to buy, consider focusing on long-term investment opportunities. Look for coins with strong fundamentals, a clear use case, and a solid development team. By investing in such projects, you may benefit from steady growth over time.

Market Capitalization

Market capitalization is an important factor to consider when choosing a cryptocurrency. It is calculated by multiplying the total number of current tokens in circulation by the current market price of the token. Coins with higher market capitalization tend to have lower volatility and higher liquidity, making it easier to enter and exit trading positions.

Scarcity and Value

In economics, scarcity creates value. The total supply and max supply of tokens can impact the value of a cryptocurrency. The total supply refers to the number of tokens currently in circulation, while the max supply is the total amount of tokens that will ever be issued. A large difference between the total supply and max supply may warrant caution as future token releases could lead to depreciation of the current market price.

Use Cases

Consider the underlying use case of the cryptocurrency and its potential to change the way we conduct business. For example, Ethereum allows for the execution of smart contracts and the creation of decentralized applications (dApps). This versatility gives Ethereum several purposes, including making non-fungible tokens (NFTs) and changing how real estate transactions are handled.

Liquidity and Tradability

Another factor to consider is how easy it is to trade the cryptocurrency. While there are thousands of tokens available, not all of them are easily tradable or convertible back into fiat currency. Centralized exchanges like Coinbase or Gemini offer a simpler process and provide access to more popular and frequently traded coins.

Risk Tolerance and Financial Situation

Investing in cryptocurrencies carries risks, and it is important to consider your own risk tolerance and financial situation before investing. Remember that cryptocurrencies are a new and untested asset class, and their future success is uncertain. Prices can be extremely volatile, and regulatory changes can also affect their value.

Know how to buy, spend and trade cryptocurrencies

There are several ways to buy, spend and trade cryptocurrencies. Here are some of the most common methods:

• Traditional finance apps: These include CashApp, PayPal, Robinhood and SoFi, which allow users to buy cryptocurrencies such as Bitcoin, Ethereum, Litecoin and Dogecoin. The main advantage of these apps is their user-friendly interface, but they offer limited functionality when it comes to utilising cryptocurrencies.
• Centralised exchanges: These are platforms managed by a single company, such as Coinbase, Gemini, Kraken and Binance. They offer more choice and functionality than traditional finance apps, but they rely on a central authority or middleman, which means your assets can be frozen or constrained.
• Decentralised exchanges (DEXes): These are not run and managed by a single entity but allow for peer-to-peer crypto transactions without intermediaries. Popular options include Uniswap, SushiSwap, dYdX and 1inch. While DEXes don't present a large honey pot for hackers, there is little recourse if users lose funds on these exchanges.
• Brokerage services: Crypto brokers allow users to simply buy and sell cryptocurrencies. An example is the Crypto.com App, which is available on the Apple Store and Google Play.
• Cryptocurrency exchanges: These are online platforms where users can buy, sell and trade cryptocurrencies using fiat currency or other cryptocurrencies. They offer more complex functions than crypto brokers, such as crypto derivatives. The Crypto.com Exchange is an example of a popular crypto exchange.
• Peer-to-peer (P2P) marketplaces: These are platforms where buyers and sellers can trade cryptocurrencies directly without a third-party exchange. Multiple P2P crypto marketplaces can be accessed all in one app via the Crypto.com DeFi Wallet.

When choosing a platform, it is important to research its reputation and security measures and to comply with local regulations and tax laws, as these vary across the world.

To buy crypto, you will typically need to create an account, provide personal information and ID verification, deposit funds into your account, select the crypto you want to buy, enter the amount and confirm the transaction.

To trade crypto, you will need to choose an exchange, create an account, deposit funds, select the cryptocurrency pair you want to trade, choose whether to buy or sell, enter the amount, set your preferred price and order type, and submit the trade order.

It is important to remember that trading cryptocurrency carries risk, and it is generally recommended to only invest what you can afford to lose.

Decide how to invest – through a traditional finance app, a centralised exchange, or a decentralised exchange

When it comes to investing in brand new cryptocurrency, there are several options available to you. Each option has its own set of advantages and limitations, so it is important to understand them before making a decision. Here is an overview of the three main avenues for investing:

Traditional Finance Apps

The simplest way to purchase cryptocurrency is through well-known financial service providers that have started to offer this service. Examples include CashApp, PayPal, Robinhood, and SoFi. These apps offer a user-friendly interface that may be more familiar and comfortable for new investors. However, their functionality is limited; for instance, PayPal does not currently allow users to transfer cryptocurrency to another crypto wallet. The main benefit of these apps is the ability to trade and invest for profit in US dollars.

Centralised Exchanges

Centralised exchanges, such as Coinbase, Gemini, Kraken, and Binance, are managed by a single company. They offer a wide selection of crypto assets, often numbering in the hundreds, providing users with more options than traditional finance apps. Centralised exchanges provide certain protections, such as insurance in case of cybersecurity breaches, regulatory clarity, and help with safeguarding assets. They also tend to have more intuitive user interfaces, making them a good choice for beginners. However, a potential downside is that your assets can be frozen or constrained by the exchange, and centralised exchanges must collect and verify personally identifying information, which may be a concern for privacy-conscious individuals.

Decentralised Exchanges

Decentralised exchanges (DEXes), such as Uniswap, SushiSwap, dYdX, and 1inch, align more closely with the decentralised ethos of the crypto industry. Unlike centralised exchanges, DEXes are not run by a single entity, but by code that enables peer-to-peer transactions without intermediaries. This means that there is no central honey pot of user funds for hackers to target. However, there have been instances of hackers exploiting bugs in the exchange code. DEXes typically have more complex user interfaces, and there is less recourse for users who lose funds on these exchanges.

Frequently asked questions