The Fundamentals Of Cryptocurrency Investment

The Fundamentals Of Cryptocurrency Investment

Cryptocurrency is a complicated technology, but it’s also accessible. It can be understood by anyone, regardless of your background.

Fundamentals Of  Currency

To understand cryptocurrencies, investors should first recall the fundamental tenets of currencies: They are typically units of measurement, stores of value, and mediums of exchange. Blockchain-based virtual assets — such as cryptographic tokens — often demonstrate these three characteristics of a currency. However, as an investor, I advise you to consider if and when these functions are only a byproduct of the objective inscribed by the creators into the asset’s software code before investing in a cryptocurrency.

Ethereum’s Ether

Ether is a virtual asset on Ethereum. Even in the current bear market, one ether trades at about $292 as of this writing, according to CoinDesk. That puts the market cap of the Ethereum blockchain at $29.66 billion — which isn’t far off from the current valuation of NASDAQ-traded Vanguard Total Bond Market ETF.

Ethereum’s Virtual Machine, which permits engineers to compose programs called “savvy contracts,” executes if the client makes an installment in its local money ether. These exchange costs on the Ethereum blockchain are subsequently named as “gas.” Like its genuine partner, fuel, I accept this virtual gas ought to be esteemed by financial backers — not for its cash properties or inborn worth but rather for the utility it satisfies in the Ethereum organization. The more applications that are being constructed and utilized on the blockchain, the more interest ether is probably going to have.


EOS is the virtual asset native to the lately launched blockchainEOS.IO. While furnishing analogous functions as Ethereum, druggies of the theEOS.IO blockchain aren’t needed to pay for deals in the blockchain’s native asset,”EOS.”, which raised a reported$ 4 billion to fund the launch and rollout ofEOS.IO, has according to a July 2018 report allocated about$ 700 million to grow the theEOS.IO ecosystem. Like with other cryptocurrencies, one benefit to investors is that EOS token holders may admit free commemoratives from systems funded by adventure enterprises supporting blockchain in what’s appertained to as an airdrop. I believe investors in Ethereum’s ether might also find it precious to keep at least a small number of EOS in their digital holdalls as an easy way to keep track of operations being launched onEOS.IO.

Tokens On The Ethereum Blockchain

The Ethereum blockchain provides an easy-to-navigate, token-generation interface referred to as the ERC20 Token Standard. This standard ensures that all people who control electronic wallets that comply with this standard can receive new tokens generated this way. These tokens can also easily be listed on exchanges that support this Ethereum standard, and most of the more than 200 virtual asset exchanges do.

Tokens created by software engineers on the public Ethereum blockchain are usually coded to fulfill a specific function, such as triggering an event, allowing access, or assigning other rights. These tokens are therefore not created as “units of measurement.” Consequently, I advise investors to value these tokens according to the overall validity of the system they are being deployed in, using startup investment criteria such as the state of the technology, experience of the team, and product-market fit. Good starting points for an investor’s research are the LinkedIn profiles of the team members (for qualifications) and the activity of the GitHub repository of the project (to track progress). Positive signs are teams led by previously successful technologists and depositories with code development stretching back over a year or more.


The Bitcoin blockchain and its currency, bitcoin (the lower case”b” differentiates the currency from the blockchain and conception), is linked by its original generators in their 2008 whitepaper on the currency as electronic cash ( enrollment needed). Still, unlike edict currencies — which are created continuously and as demanded by governments — bitcoin’s total force is limited by law to an aggregate of 21 million, making bitcoin innately scarce. Indeed through a number of major currencies accept bitcoin as a form of payment, utmost signals feel to suggest that bitcoin is substantially bought for its” store of value” function. I recommend, thus, that investors approach bitcoin purchases in the same manner as they would approach the purchase of gold as a barricade against their stocks or bond effects.


I believe that blockchains and their applications, such as cryptocurrencies, are likely to play a central role in the future of any investment strategy. However, investing in these assets is not yet well understood. This is likely in part because of their nascent history and because of contradictory handling by government agencies in the U.S. and abroad that seem to incorrectly conflate cryptocurrencies with other blockchain-based assets and functions. I advise investors to look at each blockchain project’s individual merits. They should use standard venture investment criteria such as the team or community supporting the technology, the size of the market opportunity, and the current development status of the product while differentiating cryptographic currencies from cryptographic assets.

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