How to invest in alts
Monday 02 November 2015
Alts are fickle beasts, with small market caps and volatile beyond belief. How can you invest profitably in them?
Whilst bitcoin is the granddaddy of crypto, the ‘reserve currency’ of the digital money world, there are several hundred other cryptocurrencies out there. There’s a lot to be gained - and lost - from investing in them. So, where do you start?
Read also: What happened to the alts?
Investing vs speculating
First up, let’s be clear: we’re talking about investment here, not speculation. The alts typically have low volumes and are thinly traded, some more than others, and they can be pushed around mercilessly by manipulators who want day traders to pile into what they hope is the next big thing. If that’s what you’re after, fine - just be aware that you might as well be putting your money on the roulette wheel, and treat it as such. It’s somewhere between speculation and gambling, rather than investing, which carries a longer time frame and, ideally, involves the use of more than just money.
Be prepared to lose everything
Even if you do everything right, you still need to be prepared to lose everything. If bitcoin is risky, alts are a totally unknown quantity. Events beyond your control could sink a crypto coin’s prospects overnight. Once you’ve come to terms with that reality, you’ll be able to sleep a lot better. It also frees you up to jump in with both feet.
Look for innovation
Still want to continue? Find a coin or platform that offers something unique. There are hundreds of clones out there that tweak one or other variable of the bitcoin protocol. There are only a handful that bring something new and genuinely useful to the table. Find one that has a shot of adoption through real tech and real use cases. There are some diamonds in the slurry pit of the alts, but you’re going to have to dig to find them.
A tiny clone coin with no innovation and almost no community promising a fat slice of a billion dollar industry? Sounds legit.
Find the community
There are some amazing ideas out in the alt world, with some of the brightest minds in the world driving them. But if a crypto doesn’t have an active community around it, its odds of success are close to zero. Find one with a thriving group of supporters. It doesn’t have to be large, but it has to be enthusiastic, motivated and competent, ideally with experience in key areas.
Get stuck in
Now, put your money where your mouth is, or vice versa. Everyone has skills they can bring to the table - software development, web design, writing and marketing experience, community management and more. Whatever it is, use it to raise the value of your investment in your chosen coin. Better still, many communities have funds they use for bounties for certain tasks and roles, so you can get paid in the currency you’ve decided to back, and hopefully see it growing in value as you do.
There are no guarantees in life, and definitely not in the alts. So, whatever else you do, have fun. Make sure you enjoy the ride as well as the destination.
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