Many people are feeling hopeful, and the big players are watching closely.
They know most will buy if #Trump wins and sell if #Harris wins.
Just be careful, they might move the market the other way to make money.
Should You Invest in Newly Launched Cryptocurrencies?
Many investors often find it difficult to resist the allure of a newly launched crypto. The promises it shows, expectations of high returns, and the excitement derived from being part of innovative project ideas are all very appealing.
Investing in new cryptocurrencies, however, has a lot of challenges that investors need to constantly look out for. Understanding these risks, and the corresponding benefits of these investments are important in the ever-dynamic space of cryptocurrencies.
Benefits of Investing in New Cryptocurrencies
Potential for High Growth
An important captivating motive that many investors consider is the potential for high growth. Oftentimes, new tokens start off with a considerably low market capitalization. This usually translates to the possibility of significant growth and consequently, higher returns on investments (ROIs). Early investors may be able to capitalize on this metric to make substantial profits, even when they wager only a little amount to invest. It is undeniable that the potential for rapid appreciation in price of a new cryptocurrency, though not a certainty, is never absent.
According to recent studies, stats available on Bitwise indicated that over 75% of crypto investors who put their money into new tokens made profits within the first 12 months. This was primarily due to the surge in altcoins since 2023, with Solana alone gaining as much as 900% within the year. Accordingly, the investors in this case were reported to have conducted thorough investigations into their desired choices of new cryptocurrencies at the time.
Source: https://www.binance.com/en/square/post/2637714957098
Impressive New Technologies
In many cases, further, new Cryptocurrencies may come in handy with some impressive innovative tech. New projects usually want to solve existing problems in very smart and creative ways, which is a leverage for growth in the long run. Whether it is to enhance user experience, or to make people’s lives easier by implementing latest technology, investors have clear motivations mostly pointing to the long term profits.
Ability to Tap into Trending Markets
Moreover, newly founded cryptocurrencies can align with emerging market trends. Many new coins can seamlessly tap into growing crypto sectors like DeFi, NFTs, and other cutting-edge innovations which altogether help investors make reasonable returns on the investments.
Risks of Investing in New Cryptocurrencies
High Market Volatility
In spite of the potential rewards, investors also run a great risk of losing their funds in a failed attempt at a new cryptocurrency, and quite frankly, maybe even all the money involved. One powerful factor to consider is the high volatility of the crypto markets. Even the most stable top cryptos like BTC and ETH can shed billions in market capitalization in just a few minutes of bearish momentum. When new coins are considered in a similar spectrum, they often experience extreme price fluctuations which make them very unpredictable. Losses can be very rapid, and dramatically instantaneous.
Risk of Fraud and Scam
Furthermore, new cryptocurrencies often lack the required regulations, and audits which may serve as investor protection. Many of these projects operate in unregulated spaces, which increases the risk of fraud and scams. Investors should approach these opportunities with caution, as the absence of oversight can lead to unfortunate outcomes.
Findings on Coingecko states that more than 7,000 new coins have been released so far in 2024, and only about 10% of them manage to maintain some real value and use cases. This puts a considerable 90% of investors in total loss of their funds, and no hope for any form of comeback. Consider the following graphics showing investors sentiments on crypto investments:
Disclaimer: Please do your own research (DYOR).
No Investor Protection
In addition to this, the significant lack of track record seen in new cryptocurrencies underscores that investors putting some skin in the game are clearly taking a huge risk. It is mostly difficult for investors to gather reliable data for new cryptos, essentially adding to an already growing pessimism, and also hindering gallant decision-making.
DYOR (Do your Own Research) - before Throwing Some Money in.
In a typical scenario where there's a new cryptocurrency with a buzz in town, investors need to take a pause and try to see the project through the horse rider's lenses. This means you have to do their own research.
Find the whitepaper, pitchdeck, or Gitbook
The saying “DYOR” is not just a popular slang within the crypto space, it has also become a standard disclaimer for both new and experienced investors having eyes on new cryptocurrencies. A popular first step is to go over the project’s whitepaper and other documents which make up the user knowledge base. This will give an insight and deeper understanding of some project aims, milestones, and roadmap.
Familiar Faces are Desirable
It is also important at this stage to find out about the team behind the supposed project. Strong team with known names and relevant experiences are desirable pointers. Investors need to investigate the background of every member of the team, and their reputation within the crypto industry.
Communicate with Other Investors
Community engagement is also a vital indicator of a project's potential. A strong, active community often signifies genuine interest and support for the coin. By looking for discussions on social media and forums, investors can gauge the level of enthusiasm and commitment surrounding the project.
Spend Time on Tokenomics
Finally, investors need to find out about the tokenomics and also analyze the coin’s market position to determine how it compares to its competitors. You need to familiarize yourself with key metrics, token supply, use cases, as well as distribution of the tokens.
Checklist: How to Minimize Risks When Investing in New Cryptocurrencies
It is important to have a dedicated checklist of strategy which helps to reduce risk when investing in new cryptocurrencies. Also, abiding by this check list is as important as having it in the first place.
Here are several strategies investors can use to minimize risks:
● Conduct Thorough Research
● Read the Whitepaper
● Evaluate the Team
● Check Community Engagement
● Diversify Your Portfolio
● Invest Only What You Can Afford to Lose
● Use a Dollar-Cost Averaging approach, invest smaller amounts regularly. This strategy reduces the impact of volatility.
● Utilize Secure Wallets
● Have an Exit Strategy: Define your investment goals and set exit points for taking profits or cutting losses.
● Consider Using a Trusted Exchange
Conclusion
Investing in newly launched cryptocurrencies can offer exciting opportunities for growth and innovation. However, it is essential to recognize the accompanying risks. By conducting thorough research and understanding the benefits and challenges, investors can make well-informed decisions. As always, it is crucial to invest wisely and consider your financial situation carefully. In the fast-paced world of cryptocurrency, knowledge and caution are your best allies.
