Investors find few things more alluring than the opportunity to get in on the ground floor of a new opportunity that promises to make them wealthy. They ’ re specially attracted by one that promises significant gains in a relatively short time with little or no hazard. That was the appeal of the California gold race of 1848 and the dot-com exuberance of the 1990s .
just as many ’90s-era technical school investors could n’t explain why the price of their darling software stock was going to the moonlight, few of today ‘s investors in cryptocurrency-related offerings can explain how cryptocurrencies function or why they are important. They fair have a case of FOMO : fear Of Missing Out .
investment offerings tied to cryptocurrencies, or virtual currencies, have much the same effect on investors. ( notice that we focus on securities offerings tied to digital assets, which the State Securities Board by and large regulates, and not on the buy of a particular virtual currency. )
The foremost and best-known of these, Bitcoin, was introduced in 2009. nowadays, there are hundreds of other virtual currencies—sometimes called altcoins, or alternatives to Bitcoin, such as Ether, Ripple, and Litecoin—which may use different occupation models, different formulas, and different distribution methods from Bitcoin .
Since reaching a market capitalization of $ 127 billion in less than a ten, it ’ s not surprising that Bitcoin, a cryptocurrency that may be used in position of actual currency, has stirred great interest as a inquisitive investment. Entrepreneurs have issued virtual currencies to raise billions of dollars in newfangled capital to fund their start-up businesses. And respective of the more popular digital currencies can be traded on exchanges, where they are valued in U.S. dollars or early earth currencies .
extensive ballyhoo, combined with investors ’ lack of understand, has made investments relate to digital currencies particularly susceptible to fraud. The Texas State Securities Board in deep 2017 conducted a comprehensive investigation of cryptocurrency offerings that revealed how permeant these types of hoaxes have already become .
A moment target regulative “ sweep ” of cryptocurrency offerings is afoot.
As an investor, you should look carefully at all aspects of cryptocurrencies before you commit any money to them. For case, be sure to examine their potential benefits deoxyadenosine monophosphate well as the dangers they pose. You should carefully assess all the risks, specially the prospect that a virtual currency could cursorily lose some or all of its value. And you might discover other concerns, such as taxes, that you ’ ll want to consider arsenic well .
Remember one of the identify principles of smart investing : never invest in anything you don ’ triiodothyronine understand. It pays to begin with an understand of cryptocurrencies, what they are, how they work, and the electric potential consequences of owning or investing in them .
future up : The difference between a virtual currency and a fiat currency.
The Investor ‘s Guide to Cryptocurrency Offerings was funded by a grant from the Investor Protection Trust and written in collaboration with Lightbulb Press.