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Master The Crypto by Aziz, Founder Of Master The Crypto - 3M ago

This privacy coin analysis takes a look at the two leading coins focusing on anonymizing transactions; Monero (XMR) and ZCash (ZEC).

Cryptocurrencies were launched with the aim of anonymizing online payments completely. Some of the most popular cryptocurrencies – Bitcoin, Litecoin and Ethereum – are created with specific characteristics; Bitcoin is used mainly as digital cash, Ethereum facilitates the creation of decentralized applications (dApps) and smart contracts, while Litecoin is characterized as the ‘silver‘ to Bitcoin’s gold. Unfortunately, due to their massive popularity, major coins leave lots to be desired when it comes to anonymity. For a truly private coin, you have to consider other purpose-built cryptocurrencies.

There are currently two major coins that are leading the quest for complete anonymity; Zcash and Monero. They offer a completely private online payment system but are powered by a different technology. In this article, we’re going to discuss and compare the privacy features of these coins and ascertain each of their use cases.

(Read also: Guide on Privacy Coins: Comparison of Anonymous Cryptocurrencies)

Private Cryptocurrencies

Cryptocurrencies should, in spirit and principle, be completely private. Blockchain privacy is determined by a coin’s features that obscure transactional data such as addresses and transfer amounts. Without hiding this data, blockchain forensic experts can quite easily identify users, especially since know-your-customer (KYC) laws are enforced by cryptocurrency exchanges.

Monero

Monero (XMR) adopts ‘ring signatures’, ‘ring confidential transactions’ and stealth address to obscure transactional data (the transacting parties and the amount transacted). Ring confidential transaction technology hides the route of the transaction and its amount. Stealth addresses allow the two parties to publish one address but receive payments through several unlinked addresses. This keeps, or attempts to keep sender and recipient information completely private.

Previously in 2017, it was claimed that Monero’s technology had major flaws in hiding transactional information. It was claimed that coin’s ring signatures could be de-anonymized through ‘chain-reaction analysis’.

With the integration of RingCT and stealth addresses however, those claims have been taken care of according to the Monero developer team.

Zcash

Zcash’s (ZEC) approach to privacy takes a different approach, by using a technology called ‘zk-snarks’. Basically, zk-snarks uses a concept called ‘zero-knowledge’ proofs. What this means is that you prove something while revealing a minimal amount of information. An interesting thing to note about Zcash is that stealth transactions are optional, rather than a default feature.

Trust in Zcash’s privacy was shaken when it was found that 69 percent of shielded transactions could be linked to either founders or miners. Since this is a fairly recent problem, it has still not been rectified completely.

(See also: Guide on Identifying Scam Coins)

Cryptocurrency Network Privacy

Network privacy refers to anonymizing of user information such as IP addresses through features like Tor and I2P networks.

Monero

Although Monero is a private coin that obscures its user’s data on the blockchain, it is still possible to identify users via the leaking of IP addresses. To stop this ‘vulnerability’, the Monero team is currently working on Kovri, a C++ version of the current I2P network. Kovri is being designed to de-link IP addresses from transactions and hide geolocations.

This is definitely a step in the right directions towards ensuring complete anonymity for Monero users. Kovri is still in the alpha stage so for now, users have to manage their own network protection.

Zcash

Zcash users can choose to operate on the Tor network. But like blockchain privacy, this is also optional. Unlike Monero, there are no plans for built-in network privacy features for Zcash.

Read more: Category of Cryptocurrency Market: Social Network Coins)

Default / Mandatory Privacy

Depending on the cryptocurrency, privacy features can optional or mandatory. Since there are side effects of enabling strict privacy on blockchain transfers, it’s natural that some coins will give users this choice.

Monero

Monero is a truly private cryptocurrency since it has privacy enabled by default. This default setting ensures that all transactions are carried on the same private standard. Of course, there is greater overhead fees associated with private transactions as they place a heavier workload on the network. Performance of the private network is being constantly improved by the developers.

Zcash

Perhaps one of the biggest flaws of Zcash as a privacy coin is that stealth operations are optional. This flexibility appears to be a benefit, but in reality, it just leads to a lot of confusion. Users who switch between public and private version of the blockchain risk leaking metadata that can result in reduced anonymity.

What’s more, just 13.4 percent of Zcash transactions are private. This goes to show that Zcash isn’t really being used as a privacy coin. Private transactions are expensive and few wallets support them, so this doesn’t come as much of a surprise.

Zcash is essentially a Bitcoin fork, so it’s easier for wallets to support regular transactions. Fortunately, stealth transactions on the network are becoming less expensive thanks to zk-snarks efficiency improvements. These improvements might lead to Zcash one day becoming a privacy-only coin in the future. We willl have to wait and see.

(See more: Public Vs Private Blockchain: What’s The Difference?)

Privacy-Related Drawbacks Monero

Monero is a privacy coin by default, and as such comes with high fees and slow confirmations. The October 18th hardfork which integrates bulletproofs into RingCT has made things better as it aims to reduce transaction data by up to 80 percent.

Zcash

Keeping in mind the increased processing requirements, only a few portions of Zcash users choose stealth transactions. The Sapling upgrade has made stealth transactions much less taxing by reducing RAM requirements from 3 GB to just 40MB.

For a greater understanding of the limitations of blockchain technology (slow confirmations, high fees etc.), it is vital to understand the issue of scalability. Here is an article that breaks down scalability.

Which is the Better Privacy Coin?

Cryptocurrency is still a fairly nascent technology, and as such hasn’t been fully realized yet. Even the best private coin will eventually reveal some flaws that are simply there because the technology hasn’t matured well enough.

Still, if you are looking for the best private cryptocurrency, Monero should be your top choice. Yes, it does come with high fees and slow confirmations but its blockchain and network-level privacy is almost peerless. What’s more, you can rest assured that your transaction will be completely private as it’s the default for this coin.

Zcash is making progress in being a great privacy coin but unless it mandates privacy by default, it can’t really be recommended.

(You might also be interested in: Cryptocurrency Guides: Comprehensive List of Crypto Guides For Beginners)

Beneficial Resources To Get You Started

If you’re starting your journey into the complex world of cryptocurrencies, here’s a list of useful resources and guides that will get you on your way:

Trading & Exchange Wallets

Read also: Crypto Trading Guide: 4 Common Pitfalls Every Crypto Trader Will Experience and Guide To Cryptocurrency Trading Basics: Introduction to Crypto Technical Analysis.

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You can also join our Facebook group at Master The Crypto: Advanced Cryptocurrency Knowledge to ask any questions regarding cryptocurrencies.

The post Privacy Coin Analysis: Monero (XMR) vs ZCash (ZEC) appeared first on Master The Crypto.

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Regulating cryptocurrency trading has always been an inevitable talking point for the industry. Making a case for regulation may be a beneficial idea for the greater community.

The world woke up in early February 2019 to yet another case of a cryptocurrency exchange gone bust, as QuadrigaCX filed for creditor protection and users discovered that they were unable to access their funds on the exchange. After a lot of speculation on what transpired, Jennifer Kathleen Robertson – the spouse of QuadrigaCX owner Gerald Cotton – came out with information that Cotten had passed away in December 2018 while on holiday in India. She also claimed that he was the only one in possession of the private keys of the master wallet where the entire crypto holdings of QuadrigaCX’s user base were held. This means that the funds of coin holders supposedly being held in the exchange’s cold wallets are irrecoverable! This has left QuadrigaCX’s 115,000 users in a quandary as to how to get their funds back.

(See more: Top 5 Cryptocurrency Hacks in 2018)

Should The Cryptocurrency Market Remain Unregulated?

This unfortunate event adds to the growing list of cases where cryptocurrency exchanges go bust and users of the exchange lose all of their coins and tokens. The big question confronting all players in the cryptocurrency market is this:

Can the status quo be allowed to continue, or should some drastic changes be made to prevent such cases from happening again?

Currently, the owning and trading of Bitcoin is unrestricted only in 105 countries out of 251 regions.

Those who are against any form of regulation for the industry argue that the pursuit of technology decentralization requires no degree of ‘meddling’ or regulations from any government or centralized entities. Presently, many regulators across the world do not have a favorable disposition towards cryptocurrencies given the disposition for cryptocurrencies to be used as an alternative source of financing nefarious and illegal activities.

Central banks assume full control of a country’s monetary supply in order to manage a country’s monetary policies, influenced of course by the current state of the economy. The main goal, according to economic theory, is to maintain a healthy level of inflation and economic growth. Since the start of modern banking, a centralization of the monetary system has always been the default setting.

The banking system is equipped with mechanisms to prevent money-laundering activities, stemming out illicit funds and the proceeds of criminal activity from entering the financial system. Cryptocurrencies have the potential to bypass the system, and this becomes a source of great worry for the global monetary authorities. However, there are some regulators that have recognized the potential and opportunities that cryptocurrencies and blockchain technology hold.

Our focus here is in use of cryptocurrencies as assets for trading, because this is where there are lots of grey areas. There have been more problems resulting from exchange hacks and exchange insolvencies than there have been with say, a drug dealer trying to pay for consignments with cryptos.

But the key question is:

Can we simply allow the cryptocurrency market to continue on the unregulated path, or should something be done about this at this point?

(Read also: Guide on Identifying Scam Coins)

Understanding Trading Regulation

Part of the narrative in the market is that any government entities (i.e. regulators) are the bad guys and everyone else in the cryptocurrency community are the good guys. However, cases like the QuadrigaCX event highlights the dangers of the lack of any regulations or standards that cryptocurrency exchanges – and the entire industry in general – are required to adhere to. The whole essence of regulating trading venues and the providers of brokerage or exchange services is to protect investors in the first place.

Many trading participants in the cryptocurrency market are not even aware of what it entails for a provider of an exchange or brokerage service to achieve regulated status. As an example, the foreign exchange (forex) market is the biggest and one of the most regulated markets in the Western world.

Let’s take a look at the legal requirement that an exchange or those offering brokering services are required to adhere to:

  1. A trading exchange or brokerage should be owned by a registered entity, with a known physical address.
  2. The owners and top management of such entities must be known, have experience relevant to the financial services industry and must themselves be holders of relevant professional qualifications. For instance, in order to qualify to deal on certain FX products in the US or in Singapore, you must hold certain professional qualifications. Failure to do this could see the offender being a guest of the prisons in those countries.
  3. All brokerages are required to conduct extensive Know Your Customer (KYC) checks on their clients, with each one being personally identified and place of residence known via the collection of government-ID details (international passport or drivers’ license) and a bank statement/utility bill.
  4. There are strict reporting requirements put in place, allowing regulators to know the goings-on within a brokerage house at any given time.
  5. Segregation of traders’ funds from the operational funds of the brokerage is a requirement put in place by many regulators across the world, notably in the UK, EU, US, and Australia. Enforcement of this rule began to be taken very seriously after the collapse of MF Global. This brokerage company was found in an audit to have been using the funds of their traders to stay afloat for some time.
  6. Some regulators have a minimum capital requirement for the brokers they regulate, which ensures that they are liquid enough to pay out withdrawal requests of their clients without delays.

From these points listed above, it can be seen that there is really only one beneficiary of regulation of any financial market: the investor. An absence of a regulatory framework would create tremendous risks for investors and even undermine the entire marketplace.

(See more: Understanding SEC Regulations on ICOs: What You Should Know)

Could the QuadrigaCX Saga Have Been Avoided?

Take a look at the various stipulations that forex providers are required to comply within a regulated setting as stated above. It is obvious that if these steps had been applied either wholly or partially to the cryptocurrency market, it would have been easier to detect some of the issues underlying QuadrigaCX long before things got to a head. As it is, some forensic blockchain researchers have disputed the claims of Cotton’s widow about the amount of cryptos held in the cold wallets that serve as the depository for the now-defunct exchange. Court documents also show that QuadrigaCX had been having problems with the settlement of withdrawal requests for close to a year, long before the company sought creditor protection from the courts.

Would all this have happened if the operations of QuadrigaCX were under regulatory supervision? Most likely not.

Firstly, it would have been impossible to have a situation where just one person had access to all funds of investors and the firm. No regulator would have allowed that. Secondly, the company would have been required to provide critical information as to how much of investors’ funds were being held, where they were held and the parties that had access to any wallets where such funds were held. Thirdly, some of the liquidity issues which the company had (especially the freezing of $25million of its funds held with a third-party payment processor) would not have happened if the company would have had legal coverage to move its funds autonomously without fear of clamp down from authorities. Lastly, even the simplest form of regulation would have ensured that information about the company would have been available on the regulator’s website. For instance, the Financial Conduct Authority (the SEC of the UK) has information on its website on all brokerage entities that it oversees. This acts as a credible source of corporate information about service providers and ultimately serves as a good customer protection tool.

The traditional financial market is filled with a sound regulatory framework to provide a degree of transparency and protect consumers. These mechanisms are apparently absent in the cryptocurrency industry.

(Read also: Guide to Market Capitalization: Everything You Need to Know About Market Cap)

A Case for Cryptocurrency Regulation

There are recent examples to show that markets that are weakly regulated or not regulated at all, end up causing tremendous devastation throughout the industry.

The global financial crisis of 2008 was the worst financial recession since the Great Depression, and it was triggered by the collapse of the subprime mortgage market in the US which was sparsely regulated at that time. Unregulated mortgage-backed assets known as Collateralized Debt Obligations (CDOs) were sold to unqualified investors who knew little about what they were getting into and this led to a lending frenzy which was unsustainable. Arguably, better oversight may have prevented the global financial meltdown entirely.

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Master The Crypto by Aziz, Founder Of Master The Crypto - 4M ago

With over a billion dollars worth of coins stolen in crypto hacks in 2018, we take a look at the top 5 cryptocurrency hacks in 2018.

The distributed architecture of blockchain technology is one of the strongest appeals for cryptocurrencies as a secure form of money. Since the creation of Bitcoin in 2008, blockchain technology has gained a credible reputation for being a secure network that is extremely hard to infiltrate.

A decentralized network is far less prone to hacks and security attacks as compared to a traditional centralized structure since the latter is vulnerable to a single-point-of-attack.

It is much easier to hack a single database as compared to a distributed network made up of many databases.

However, despite the security strength of blockchain technology, various hacks have occurred within the cryptocurrency industry. These cyber-attacks are not focused towards the blockchain itself, but towards the several institutions and entities within the ecosystem, such as cryptocurrency exchanges and digital wallets. These targets are much easier to hack as compared to the blockchain itself, and the perpetrators can get away with a tremendous amount of coins and tokens worth millions!

In fact, hackers stole $927 million from various cryptocurrency exchanges and other platforms in 2018, according to a recent report from blockchain security firm, CipherTrace.

Let’s take a look at the top five cryptocurrency hacks in 2018.

(Read also: Cryptocurrency Investing vs Trading: What’s the difference?)

Top 5 Cryptocurrency Hacks in 2018 1. IOTA Phishing Attack

$4 million worth of IOTA coins was stolen from user wallets after they generated seeds on a fraudulent phishing website called Iotaseed.io (not defunct). IOTA holders were caught like a rat in a trap in this phishing scheme since it was advertised at the top of Google search as an official IOTA seed generator.

Phishing is a fraudulent attempt to steal sensitive user information such as credit card details, usernames/passwords and personal information by disguising as a credible and trustworthy website.

Visitors that created their IOTA wallet on Iotaseed.io provided hackers with their private keys for their wallet, thereby compromising the digital wallets. The cybercriminals behind the phishing website had been collecting passwords and seeds for an unknown period of time, and finally cleaned out the wallets of unaware IOTA users on January 19, 2018. At the same time, some of the full nodes on the IOTA network also suffered from a Distributed Denial of Service (DDoS) attack, which compromised the ability of the network to validate and process transactions. Upon further investigations, however, the IOTA founders claimed they did not find any connection between the DDoS attack and the fake phishing website.

Unfortunately, little could be done to reverse the transactions since the blockchain was created to be immutable and tamper-free. Moreover, the hackers abused valid user credentials, so all the transactions were legitimate from the point of blockchain security.

(See also: Guide to Stablecoin: Types of Stablecoins & Its Importance)

2. Coincheck Hack

On January 26, hackers compromised user accounts of Coincheck, a Japan-based cryptocurrency exchange. A whopping 560 million NEM tokens worth around $530 million at that time was stolen, making Coincheck’s hack one of the biggest the industry has ever seen, even surpassing the hack of Mt. Gox!

Upon further investigation, it was found that Coincheck exchange suffered from a security lapse that enabled the hack. Apparently, one of Coincheck’s internal computer systems was infected with malware that led to a data breach. The virus allowed attackers to collect many private keys a couple of weeks prior to the hack. Hackers successfully ran off with the stolen coins easily since the Coincheck kept their assets in hot wallets, which are more vulnerable to hacks than cold ones due to their connection to external networks.

Hot wallets are digital wallets that are connected to the internet, such as those at your cryptocurrency exchanges or your mobile app wallets. Cold wallets, on the other hand, are those that are not connected to the internet, such as hardware wallets and paper wallets.

In addition to that, Coincheck’s processes suffered from another vulnerability. There was no multi-signature (multi-sig) security process to strengthen the security process. Multi-sig requires multiple (trusted) users to confirm and approve transactions before sending the funds.

Fortunately, the NEM developers quickly responded to the attack and returned almost all of the stolen funds to the victims.

(Read also: Understanding Cryptocurrencies: Game of Thrones Edition)

3. POWH Coin Hack

Proof of Weak Hands (POWH) Coin was advertised as a legitimate and autonomous pyramid scheme that rewarded early users with 10% of dividends. Despite several warnings towards this scheme, many investors still participated and the value of POWH Coin quickly grew to over two million dollars within a short period of time.

The idea behind POWH was simple: a parody pyramid scheme designed to be as transparent as possible. Using Ethereum smart contracts, POWH tokens would rise in value by 0.25% whenever a unit was bought and decreased by 0.25% when a unit was sold. This was similar to a game where those with an ‘iron hand’ (someone who could withstand the volatility of the market by not selling their coins) would be rewarded. Many invested in this project as a joke to make a quick buck.

However, on January 28, a white hat hacker managed to drain user wallets by exploiting a common blockchain vulnerability, an unsigned integer underflow. Essentially, the underlying smart contracts of POWH got hacked three days after the initial coin offering (ICO) went public. A total of 866 ETH worth over $950,000 was stolen.

(See more: Guide on Identifying Scam Coins)

4. Verge Hack

The Verge network hack was a prominent hack that was designed to generate excess Verge (XVG) coins fraudulently, rather than stealing the coins from unsuspecting users. Starting from April 4 to May 22, attackers exploited several blockchain security vulnerabilities, such as manipulating the blockchain’s difficulty, faking timestamps, and dominating the hashrate of the network. These actions allowed cybercriminals to mine (create) new coins at a higher rate, with a cumulative value of counterfeited coins that were worth over $1 million.

The hackers managed to dominate the Verge network three times for intervals of several hours at a go and disabled payments from other participants. During these intervals, they mined new cryptocurrency at a rate of 1,560 Verge coins per second. Additionally, the attackers reduced the mining difficulty of the blockchain by using fake timestamps and thereafter..

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This article highlights 4 lessons the cryptocurrency market taught us about investing and educates us on how we should evaluate the market moving forward. 

Most initial coin offerings (ICO’s) that have launched over the past 2 years have completely, and utterly failed. Yes, I’ve written about why this doesn’t matter – and it may still not really matter. We’ll get more into that in a moment.

But a lot of people – including myself – have lost money in the market. It’s worthwhile to take a look at the past 2 years and see what the cryptocurrency market has taught us about investing.

Here are 5 lessons that every cryptocurrency investor can take into the future.

(See also: Cryptocurrency Investing vs Trading: What’s the difference?)

Lesson 1: Understand What is A Cryptocurrency

This seems like a basic point. Naturally, it seems that most of us understand the basic concept of cryptocurrency. However, it is worthwhile to dive into this a bit further.

The industry is changing so rapidly, that unless you’re trading on a daily basis or working in the industry,  it is easy to overlook the fundamentals of what makes up a cryptocurrency.

As an enabler that facilitates disruption across many different industries and use cases, there are numerous nuances that an individual must understand before diving into the market. The market is filled with various complex technical terminologies and concepts that are confusing to the average Joe.

As any seasoned investor in the traditional markets – bonds, commodities, foreign exchange or otherwise – will tell you, familiarity and comprehension of the market they’re in is a key factor to success. 

The cryptocurrency market is no different. Re-visiting basic concepts in a market filled with extreme sentiment and volatility can truly help you in strengthening your market edge and managing your risks.

That is why we have consolidated a list of helpful resources that aims to simply explain various concepts and terms in the cryptocurrency market here:

Cryptocurrency Guides: Comprehensive List of Crypto Guides For Beginners

(Read also: Top 10 Crypto/Blockchain Infographics You Must Know)

Lesson 2: Look Beyond the PR and Marketing Hype

We are all human. And as such, there is a certain predictable tendency that we all conform towards. Analyzing the cryptocurrency market in 2017 and 2018, there is a visible pattern of market predictability during the bull run in 2017 and the consequent market crash in early 2018

As Dan Ariely of Predictably Irrational shares in his book, as an individual, we may be unpredictable. However, as a segment of a larger population or group (programmers, tech enthusiasts, cryptocurrency traders, etc.) we are very predictable.

One of our predictable behaviors is being vulnerable to the storytelling hype that connects to our inner core drives. It could be the fear of missing on a huge opportunity, the need to feel liked, the desire to impress one’s peer group or simply the drive to a higher calling.

It is these psychological traits that have driven marketing and public relation (PR) practices for decades. You only have to look back at the father of PR – Edward Bernays – to realize that immense psychological power that went into developing PR. Edward leveraged the insight of his uncle at the time – none other than Sigmund Freud, a psychologist who is widely regarded as one of the 100 most important people of the 20th century

These psychological concepts are at the base of what attracts us in the cryptocurrency investment arena. Practices such as massive pre-sale discounts, fluffy claims by projects and paid reviews are a common sight in this largely unregulated industry. The media adds to the flames, sparking our curiosity, concern, and excitement. Unraveling these layers of fluff and hype is a valuable skill that one must acquire in order to differentiate between a fundamentally good project or a bluff.

Here a few questions to consider:

  • Are the underlying fundamentals of what this company says possible?
  • Are the underlying fundamentals of this team sound? Are they a good team?
  • What about this company is verified VS non-verified?
  • Is the market signaling hype?
  • Does it seem too good to be true?

Here is a helpful list that would assist you in evaluating the fundamentals of a project:

A Guide To Fundamental Analysis For Cryptocurrencies

(See also: Will A Crash in Bitcoin’s Price Lead to Its Demise?)

Lesson 3: You’ll Lose 9 of 10 “Alt Bats”

The number may actually be more. Investing – from my limited experience – in early-stage tech startups is a risky game. Cryptocurrencies are a highly risky asset class due to its infancy and speculative attraction. 

Investing in a cryptocurrency project entails ‘taking a bet’ on the success of the venture, by assessing various factors that include the strength of the team, the viability of the project, achievability of the roadmap, utility of the tokens and many more. If successful, we would revel in the returns of our investment.

And while the cryptocurrency market is designed to look (and feel) like a stock market, it’s really nothing more than an early stage, unregulated angel investment market (minus the part where you get to own a piece of the company). Therefore, taking regular startup vernacular into play, looking at the failure rate of most startups will tell you that 9 of 10 startups fail in the first 5 years of operation.

We’re 2-years in this volatile market and have already seen 60%+ of previous ICO’s get completely wiped out. The valuation of all coins has taken a huge hit, with prices falling by an average of more than 85% since their all-time highs. It must also be mentioned that scams and Ponzi schemes in the industry are a common occurrence.

(Read more: Coins, Tokens & Altcoins: What’s the Difference?)

Lesson 4: DYOR – Due Diligence

Investing is hard. No one is going to do it for you. No one is going to give you all the right insights. No one has the crystal ball of clarity on where the market is going. You need to take time to do the research yourself. The burden is on you to dig into a project and truly understand what you’re getting into.

It takes time. If we’ve learned anything from the Bitconnect, Bitcoin, and recent QuadrigaCX scandals it’s that every investor must do their own deep due diligence. This requires going further than a website. Further than a white-paper. Further than a LinkedIn check.

As someone who’s had their profile stolen and used for both a white paper and a website, I can assure you that there are companies out there looking to leverage influencers, high-net-worth individuals, credible technology leaders and the like – for scam purposes. If you’re not taking the time to dive into the details of a white-paper, the technical capabilities of the project, the investors and advisors listed – you stand a good chance to lose your money.

We only have to look back at the billions lost over the last couple of years.

(See also: Evolution of Cryptocurrency: Replacing Modern Cash)

Summing it All Up

The landscape is changing. Regulation is coming. And yes, there will be more trends – securitized token offerings (STOs) may just one of the more recent ones.

Until then, here is the summary of the 4 core lessons that every investor in an early-stage, blockchain company can leverage on:

  1. Truly understand what cryptocurrency is all about – and dive into the nitty-gritty of each potential investment.
  2. Look beyond PR & Market hype
  3. 9 of 10 early stage startups will fail. Be prepared for this and invest accordingly.
  4. Do your own deep due diligence

Here’s to 2019 investing in great companies in 2019 and beyond.

Cahill Puil is an author, founder and CEO of Byte Media Group. He has interviewed many of the Top 100 Blockchain CEO’s, Founders and influencers. His insights have been featured in dozens of publications – from Hackernoon, Brave New Coin, and Cryptocurrency News to Fintech Weekly, Tabb Forum, and CEO World. His team is currently focused on helping the leading blockchain and technology companies build credibility, exposure, and share stories with innovative thought-leadership and PR.

Beneficial Resources To Get You Started

If you’re starting your journey into the complex world of cryptocurrencies, here’s a list of useful resources and guides that will get you on your way:

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This article highlights important lessons we learned about the cryptocurrency market in both 2017 & 2018 and educates us on how we should evaluate the market moving forward. 

Most ICO’s that have launched over the past 2 years have completely, and utterly failed. Yes, I’ve written about why this doesn’t matter – and it may still not really matter. We’ll get more into that in a moment.

But a lot of people – including myself – have lost money in the market.

It’s worthwhile to take a look at the past 2 years and see what the cryptocurrency market has taught us about investing.

Here are 5 lessons that every cryptocurrency investor can take into the future.

Understand What is Cryptocurrency

This seems like a basic point. Naturally we all understand what is cryptocurrency. But I think it’s worthwhile to dive into this a bit further.

The industry is changing so rapidly, that unless you’re trading on a daily basis, working in the industry or are really truly only looking at cryptocurrency on a daily basis it’s very easy to overlook the fundamentals of what is cryptocurrency.

As an application layer that sits on the blockchain there are many many nuances that true traders will dive into and understand – that can give you an edge if you’re going to be investing on a regular basis.

Yes, Securitized Token Offerings, Initial Coin Offerings, and coin market caps are easy enough to understand, but if the past two years is any indication on true clarity about the market – it’s that we are all still learning.

As any great investor in markets, bonds, commodities, foreign exchange or otherwise will tell you – they truly know and understand the core of the markets they’re working with.

Cryptocurrency is no different. My feeling is that re-visiting basics – despite the hype, the speed, and the chaos that surrounds a $5-billion dollar Bitcoin and Ethereum market cap increase in a single day – can only help an investor strengthen their market edge.

 (Read more: Did 2018 Signify The Downfall of Crypto Funds?)

Look Beyond the PR and Marketing Hype

We are all human. As such we’re all predictable. Looking back on the investment lessons of 2017 and 2018, this is hugely apparent in the massive bull-run and spike of cryptocurrencies. It provides us with a valuable lesson.

As Dan Ariely of Predictably Irrational shares in his book, as an individual we may be unpredictable, but as a segment of a larger population or group (programmers, tech enthusiasts, crypto currency traders, etc.) we are very predictable.

One of the things that we have fallen for ages is the storytelling hype that connects to our inner core drives.

It could be the fear or missing on a huge opportunity. It could be the need to feel liked. Or the want to impress your peer group. It could be the drive to a higher calling.

It is these psychological traits that have driven marketing and PR for decades. You only have to look back at the father of PR – Edward Bernays – to realize that immense psychological power that went into developing PR.

Edward leveraged the insight of his uncle at the time – none other than Sigmund Freud.

These psychological concepts are at the base of what pull at us in the cryptocurrency investment arena. Companies leveraging massive discounts on tokens if you only invest now. Urgency – private sale is almost sold out. Potential for gain and success – this cryptocurrency will be the next Bitcoin or Ethereum, you’d better get in now.

The media adds to the flames, sparking your curiosity, your concern, your excitement.

But underneath all of this is the core investment – the core of what you’re putting your money towards. This is what we need to constantly remind ourselves of. Myself included.

A few questions to consider:

  • Are the underlying fundamentals of what this company says possible?
  • Are the underlying fundamentals of this team sound? Are they a good team?
  • What about this company is verified VS non-verified?
  • Is the market signaling hype?
  • Does it seem too good to be true?
You’ll Lose 8 of 10 “At Bats” & Core Startup Fundamentals Apply

The number may actually be more. Investing – from my limited experience – in early stage tech startups (which is what cryptocurrency is all about) is a very risky game.

We literally take bets on the potential outcome of a team and their ability to deliver something to market, in the time frame they say they can, how they say they can, and hope that our insight about the market at that time will prove to be right. Right enough for us to get a return on our investment.

There’s no product. There’s no service. There’s no revenue. There’s nothing but an idea and a team of people looking to work on that idea.

And while the cryptocurrency market is designed to look (and feel) like a stock market, it’s really nothing more than an early stage, unregulated angel investment market (minus the part where you get to own a piece of the company).

Thus taking regular startup vernacular into play, looking at the failure rate of most startups will tell you that 9 of 10 startups fail in the first 5 years of operation.

We’re 2-years in and have already seen 60%+ of previous ICO’s get completely wiped out. As an example, this company raised an astounding $74-million and has lost 94%+ of it’s value in just a couple of years. There are countless others that have done the same. $30-million down to a $100,000 market cap. Exit scams and the like.

The lessons from the past 2 years can be looked at as follows:

  1. You’re investing in tokens from early stage startups (9 of 10 of these will fail)
  2. Look for companies that have secured some type of traction before betting on their tokens
DYOR – Due Diligence

Investing is hard.

No one is going to do it for you. No one is going to give you all the right insights. No one has the crystal ball of clarity on where the market is going.

You need to take time to do research yourself. To dig into a company and truly understand what you’re getting into.

It takes time.

If we’ve learned anything from the Bitconnect, Bitcoiin, and recent QuadrigaCX scandals it’s that every investor must do their own deep due diligence.

This requires going further than a website. Further than a white-paper. Further than a LinkedIn check.

As someone who’s had their profile stolen and used for both a white paper and a website I can assure you that there are companies out there looking to leverage influencers, high-net-worth individuals, credible technology leaders and the like – for scam purposes.

If you’re not taking the time to dive into the details of a white-paper, the technical capabilities of the startup, the investors and advisors listed – you stand a good chance to lose your money.

We only have to look back at the billions lost over the last couple of years.

Summing it All Up

The landscape is changing. Regulation is coming. And yes, there will be more trends – securitized token offerings may just one of the more recent ones.

Until then here are the 5 core lessons that every investor in early stage blockchain company token’s can leverage:

  1. Truly understand what cryptocurrency is all about – and dive into the nitty-gritty of each potential investment.
  2. Look beyond PR & Market hype
    – Are the underlying fundamentals of what this company says possible?
    – Are the underlying fundamentals of this team sound? Are they a good team?
    – What about this company is verified VS non-verified?
    – Is the market signaling hype?
    – Does it seem too good to be true?
  3. 9 of 10 early stage startups will fail. Be prepared for this and invest accordingly.
  4. Look for companies with good traction before investing in them
  5. Do your own deep due diligence

Here’s to 2019 investing in great companies in 2019 and beyond.

Cahill Puil is an author, founder and CEO of Byte Media Group. He has interviewed many of the Top 100 Blockchain CEO’s, Founders and influencers. His insights have been featured in dozens of publications – from Hackernoon, Brave New Coin, and Cryptocurrency News to Fintech Weekly, Tabb Forum, and CEO World. His team is currently focused on helping the leading blockchain and technology companies build credibility, exposure, and share stories with innovative thought-leadership and PR.

Beneficial Resources To Get You Started

If you’re starting your journey into the complex world of cryptocurrencies, here’s a list of useful resources and guides that will get you on your way:

Trading & Exchange Wallets

Read also: Crypto Trading Guide: 4 Common Pitfalls Every Crypto Trader Will Experience and Guide To Cryptocurrency Trading Basics: Introduction to Crypto Technical Analysis.

You can also join our Facebook group at Master The Crypto: Advanced Cryptocurrency Knowledge to ask any questions regarding cryptocurrencies.

The post 5 Lessons the Cryptocurrency Market Taught Us About Investing appeared first on Master The Crypto.

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Master The Crypto by Aziz, Founder Of Master The Crypto - 5M ago

This article takes a look at the effects of the bearish year of 2018 on crypto funds. DId 2018 signify the downfall of crypto funds? Read on to find out.

The emergence of cryptocurrency hedge funds – or crypto funds for short – has been well-documented in the bull market in 2017. Crypto hedge funds represent a part of the crypto funds universe, which also includes crypto venture capital and crypto private equity. Grouped together, there are currently 622 crypto funds across all categories, 303 of those being crypto hedge funds, which represent assets of less than $4 billion. Approximately half of the funds are based in the United States, with multiple launches being seen in Australia, China, Malta, Switzerland, The Netherlands and the U.K. in 2018. 2017 represented a great year to start a crypto hedge fund, since the blistering financial returns within the year made it seem almost too easy for anyone to make money.

 (Read more: 5 Valuable Lessons From The Cryptocurrency Market in 2018)

Bleak Outlook for Crypto Funds

On the flip side, 2018 has seen a significant downturn in the prices of the cryptocurrency market. In fact, the general cryptocurrency market crashed by as much as 80% since its all-time high that was achieved in late 2017. Since crypto hedge funds are fully focused on investing in the wide array of over 2,000 coins and tokens in existence, cryptocurrencies make up a significant portion of a crypto hedge fund’s portfolio. Therefore, it was inevitable that crypto hedge funds were hemorrhaging huge amounts of losses and severely underperformed conventional hedge funds that were focused on traditional investment securities.

Here’s a look at the average hedge fund returns on a monthly (Oct 2018), 3-month and yearly timeframe:

It is obvious that crypto hedge funds were making significant rates of returns in the market boom in 2017, recording a whopping 1,708% returns! However, 2018 was underwhelming with an average loss of 56%.

Here’s a more in-depth, monthly breakdown of the rate of returns in 2017 and 2018:

Ultimately, cryptocurrency investor who invested in a crypto hedge fund lost significant amounts of their capital. Even if they have not sold their positions and ‘realized’ the losses, their capital is still tied up in coins that are only a fraction of what they used to be worth.  With Year-to-Date (YTD) returns of -56.78% in 2018, investors had to consider other alternative options to reduce their risk profile within this disruptive, highly-growing technology space.

(See more: Analyzing Cryptocurrency Risk: Existing Coins vs ICO)

Cryptocurrencies: The Most Volatile Asset

It is no surprise that cryptocurrencies are highly speculative in nature and represent one of the most volatile asset in existence. Volatility refers to the rate of change in prices over time; the prices of a highly volatile asset would aggressively fluctuate up and down in the short-term. In order to understand how volatile cryptocurrencies really are, let’s take a look at a comparison of the volatility between major asset classes:

We can see the crazy volatility of Bitcoin’s prices as compared to traditional securities such as the Foreign Exchange (ForEx) market, stock market and gold market.

Cryptocurrency’s Correlation With Bitcoin

By now, most should know that the majority of token and coins are directly correlated with Bitcoin’s performance; they tend to stand and fall in-line with Bitcoin’s price movements. This is no coincidence since Bitcoin is the first decentralized cryptocurrency to be created and represents the ‘Founding Father’ of the cryptocurrency market. Additionally, Bitcoin is the largest cryptocurrency around since it possesses over 50% of the overall market share. Therefore, it is of no surprise that Bitcoin represents for the barometer of the overall health of the cryptocurrency market, and it’s dominance warrants a mirror-like movement of all other coins and tokens in the industry.

Here’s a look at the statistical correlation of other cryptocurrencies with Bitcoin:

(Source: Sifr Data)

Furthermore, cryptocurrencies are a relatively young asset class that will likely continue to be volatile until it matures in the long-run. Even the volatility of equities, currently at 13.4% from the stock market’s Volatility Index (VIX), is completely dwarfed by that of Bitcoin’s volatility which stands at a whopping 70% (down from 150% earlier in the year).

The total market capitalization of the cryptocurrency market rose from $18.3B at the start of 2017 to $613B by the start of 2018, generating a sterling growth of over 3000%!  The market for cryptocurrencies is rapidly changing, presenting huge opportunities for investors, and in turn, investment managers. But, individuals looking to capitalize on the inefficiencies of the market by offering investment opportunities in actively managed hedge funds need to be wary of and disclose the associated risk.

The cryptocurrency market – though exhibiting similar patterns over the years – is an extremely tumultuous market. Here’s a look at the sequence of Bitcoin rises and crashes over the years.

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Master The Crypto by Aziz, Founder Of Master The Crypto - 6M ago

This article takes a look at what is the difference between a crypto mainnet vs testnet, two technical terms that serve different functions.

Mainnets and testnets are common technical terms used in the cryptocurrency world to denote blockchain networks that possess vital functions. Let’s take a look at the differences between a cryptocurrency mainnet and testnet:

What is a Mainnet?

Mainnet – short for main network – is the original and functional blockchain where actual transactions take place in the distributed ledger and the native cryptocurrencies possess real economic value. In other words, the mainnet refers to the actual open-sourced blockchain itself that is publicly verifiable. The mainnet carries out the functionality of executing real transactions within the network which is stored on the blockchain and is referred to as the ‘end product’ that is open for the public to use.

Each transaction executed on the blockchain requires participants to pay a transaction fee (payable in the native coin) so as to incentivize miners to validate the transactions and prevent network spamming. For their hard work, miners will be rewarded with native coins from the protocol and also the transaction fees paid by the participants.

(Read more: Coins, Tokens & Altcoins: What’s the Difference?)

Importance of Mainnet

A mainnet serves a variety of vital functions that include:

1) Proof of Development

A Mainnet is a verifiable proof that the project has developed a functional and working blockchain where actual transactions can take place. Having a mainnet is a sign that the project is now live and is in technical progress. Additionally, a live mainnet would put the functionalities and capabilities of the blockchain to the test, since the public can participate in the network and any malfunction could compromise the inner workings of the blockchain. Therefore, launching the mainnet takes a considerable amount of resources and development to ensure that every component is working as it should. More than that, a mainnet serves as a working proof that the project is executing their vision well.

2) Credibility

A project with a mainnet possesses undoubtedly more credibility than a project without one. Since a mainnet is an actual and functioning protocol, all transactions are live and participants can transact with one another with the native coins of the blockchain. interested parties in the community can opt to become a participating node and download the protocol software. Assuming that the blockchain is open-sourced and free for anyone to participate in, the underlying codes of the blockchain is visible to the public and any concerns or issues can be highlighted by participants. The point is, the existence of a mainnet enables the creation of a live ecosystem of participants that facilitates real interaction and transactions to occur with full transparency. Without a mainnet, the project is purely conceptual or ‘theoretical’ with no working product for participants to test out. This is particularly important to understand when evaluating an ICO project that is trying to raise money; it is much harder to evaluate projects without a mainnet or even a testnet.

(See more: A Guide To Fundamental Analysis For Cryptocurrencies)

What is a Testnet?

The testnet- short for test network – is an exact replica of the original blockchain, with the same technology, software, and functionalities. The only difference is that transactions on the testnet are simulated (or ‘fake’) and the coins in the testnet does not possess any real value outside of the testnet environment.

The native coins in a testnet are like monopoly money. You can’t buy anything with that.

The testnet is a simulated environment where the functionalities and capabilities of the (original) blockchain are constantly tested and tweaked by application developers and testers. The purpose of having a mainnet is to develop the blockchain before it goes live or for ongoing testing of blockchain functionalities in a sandbox environment that is separate from the actual blockchain. The transactions on the mainnet are ‘fake’ since they are test transactions, with no transaction costs incurred and no deployment costs required by developers. Since the coins on the testnet are worthless, there is no economic incentive for miners to mine since their only purpose is to facilitate transaction testing.

In summary, activities deployed on the mainnet serves as a simulation of how the protocol would function on the mainnet itself.

Just like how pilots need to undertake 3D-simulation of flying planes before flying an actual plane, a testnet provides a testing ground for developers to test the protocol’s functionalities.

(Read also: Is it Too Late to Buy Bitcoin and Is It too Late to Invest in Cryptocurrency?)

Importance of Testnet

Testnet serves a variety of vital functions that include:

1) Constant Development

Blockchain technology is still in the infancy stages and a tremendous amount of testing and development is needed to enable mainstream adoption and usage. For instance, one of the main issues that are being addressed in the blockchain community is scalability. Rigorous research and development are being undertaken by a wide range of projects to enhance a blockchain’s capability of processing more transactions. In order to constantly enhance a blockchain’s capabilities, numerous testing on smart contract functionality, transactions, and the mining process must be undertaken. The testnet serves as a simulation on how the actual blockchain protocol (mainnet) would work under real-world conditions.

2) Prevent Disruption

A testnet allows testers and application developers to experiment on the features and functions of the protocol in a separate environment, without worrying about disrupting the main blockchain. Making the tests on the mainnet would be a nightmare since the complex interactions between components in the protocol could compromise the network or break the main chain. This would cause massive disruptions to the blockchain and could undermine the protocol. It is thus a common practice for projects to run a prototype on a testnet first, in order to iron out the technical details and ensure that everything is in order.

3) Free Testing

For blockchains that allow smart contract functionality, native coins are required to be spent in order to execute smart contract transactions. For instance, Ether (ETH) is needed to pay for computations that occur in the Ethereum blockchain (Similarly called ‘Ethereum Virtual Machine’). Testnets provide a testing ground for developers who are keen to create applications on the blockchain or test out certain functionalities without spending real currencies. It would be extremely expensive for developers to test out their application features or run experiments on the mainnet, since they would then need to buy real-value coins in bulk.

(See also: Public Vs Private Blockchain: What’s The Difference?)

Mainnet vs Testnet in Action

In order to get a better grasp of the differences between mainnet and testnet, let us take a look at Ethereum blockchain. Ethereum is an open-source, decentralized platform that facilitates smart contract functionality and allows for the creation of decentralized applications (dApps) to run securely without any control from intermediaries or third party.

Think of Bitcoin as a single app in your smartphone that is great in what it does, which is to facilitate value efficiently (digital cash). Ethereum on the other hand is like the app store, which enables anyone to create any kind of mobile applications and can be downloaded and used by anyone. Blockchain platforms like Ethereum expand the functionality of blockchain technology, while Bitcoin is just a single representation of this revolutionary technology.

A mainnet and a testnet are two separate networks that operate independently from each other. Here’s an illustration from the context of Ethereum:

Ropsten is the most popular public testnet for Ethereum and is often used as a testing network for developers creating their own dApps on the Ethereum blockchain. Using Ropsten network, DApp developers can experiment on the functionalities on the dApp and also avoid using valuable ETH that is needed for transaction fees and smart contract deployment. Once they’re confident that their dApps work and testing is complete, they can confidently deploy their dApp on the main Ethereum network!

What sets a mainnet and testnet apart are the following factors:

  1. Network ID: A network ID is just an identifier for a network, similar to your ID card that represents your identity. If a new node wants to join the actual Ethereum blockchain itself), they will need to join the mainnet which has a network ID of 1. If they’re keen on joining the testnet instead, they can join the Ropsten testnet which is identified using a network ID of 3.
  2. Genesis Block: This refers to the very first block in the blockchain, which represents the starting point. Since both the mainnet and tesnet are different networks, they have a different genesis block. However, the content of the genesis block can be similar.

(Read more: Guide to Ethereum: What is Gas, Gas Limit and Gas Price?)

Upgrades

From time to time, projects would undergo changes to enhance the capabilities of the blockchain. This is akin to the software updates of your smartphones that has solved previous issues or bugs associated with the previous software versions. Although we mentioned early on that mainnets are the ‘end product’, it may not be the ‘final product’. The blockchain can undergo updates or revisions to a particular functionality, depending on the need of doing so by the developers and the greater community. In order to upgrade the blockchain, a hardfork is required. Here is a detailed guide that explains the complex concept of hard forks.

(See more: Guide to Forks: Everything You Need to Know About Forks, Hard Fork and Soft Fork)

Mainnet Swap

When a project is starting out, it will issue their tokens on other blockchains such as Ethereum or NEO to raise funds. Once they have developed their own blockchain, they will need to migrate the existing tokens issued on other blockchains to the project’s native blockchain (mainnet). This is common practice for new projects in the ICO phase.

This process is called a mainnet swap or a token swap, involving the exchange of one coin for another coin on a one-to-one ratio. The old coin that is issued on another blockchain is discarded and a new coin is issued on the new native blockchain that has been developed and launched by the project. Mainnet swaps usually occur in the following way:

  1. Registration & Auditing: Coin holders are expected to register their coin through the project’s developers, who will then accredit these coins through a supported digital wallet. At the scheduled mainnet swap date, the old tokens are burned while the new, official coins will replace the old coins in the same wallet.
  2. Cryptocurrency Exchange Support: Once the announcement is made, coin holders are invited to keep their coins in the cryptocurrency exchange that supports the swapping process. At the scheduled swap date, the exchange will handle the auditing, accrediting and exchange of the older coin for the newer ones.

(Read also: Breaking: 88% of Crypto Exchanges are Manipulating Trading Volume to ‘Boost’ Rankings)

Effects of Mainnet on Price

The release of a project’s mainnet can cause tremendous excitement in the community, which could affect the coin’s price. This could also contribute to an increase in volatility of the coin’s prices during that period. Let’s take a look at several instances where a mainnet launch coincided with spikes in prices.

Golem (GNT)

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This article explores the concept of crypto volatility and why volatility is important in the growing cryptocurrency market.

The great market crash in 2018 is a hard lesson for many in the cryptocurrency market on the extreme volatility of cryptocurrencies. Within a space of 2 years, the prices of cryptocurrencies have vigorously fluctuation from end to end, with many considering cryptocurrencies to be a highly unstable market full of speculation and uncertainty. The first and largest cryptocurrency based on market capitalization – Bitcoin experienced massive growth in 2017, growing from $700 to almost $20,000! That’s a staggering 27,000% rate of return in merely 12 months.

It is no surprise that many jumped on the cryptocurrency bandwagon. However, the market soon became too unstable once it grew to massive levels, and thereafter experienced a massive collapse for the whole of 2018. The market capitalization of cryptocurrencies fell from an all-time high of $813 billion to a mere $100 billion, with the general prices of all coins falling close to 90%.

Cryptocurrencies are seen as a complex, disruptive and elegant technology that has made lots of people rich. It is therefore not surprising that many are attracted to the allure and risky state of cryptocurrencies.

Let us explore the important market concept of volatility and how it is an integral component in the cryptocurrency market.

(See more: 4 Types of Coins to Diversify Your Crypto Portfolio & Manage Risks)

What is Volatility

In traditional finance, volatility is defined as the statistical measure of dispersion of an asset’s price. Simply put, volatility describes the extent to which an asset’s price fluctuates over time. An investment is considered volatile if its prices move aggressively up or down daily, as can be seen in the cryptocurrency market. Here’s an illustration of volatility:

Low-volatile assets such as gold or government bonds are extremely stable, with prices fluctuating in a steady manner and doesn’t change as frequently. High-volatile assets, on the other hand, moves up and down in value rapidly and more aggressively.

(Read also: Will A Crash in Bitcoin’s Price Lead to Its Demise?)

Volatility and Risk

Volatility is a vital concept to understand since it measures risks. For investors and traders, understanding their risk tolerance is always the first step before engaging in any form of investments. Different individuals possess a different level of risk tolerance, and this affects their choice of investments. For instance, a 50-year-old retired pensioner would probably have a very low-risk tolerance since their main priority would be to preserve their wealth. The types of investments they would be looking at would be pension funds, mutual funds, low-yielding government bonds or highly-stable blue-chip stocks that pay-out a sizable dividend income. Alternatively, a 25-year-old fresh from university would probably have higher risk tolerance and would consider investing in riskier investments that include cryptocurrencies and technology stocks.

Here’s a look at the varying levels of risk appetite.

It must be mentioned that the level of risks that one chooses to undertake is highly correlated to the potential returns that he would acquire. In other words, a higher risk investment is associated with a greater probability of generating higher returns while a low-risk investment would yield a smaller rate of returns. This is called the risk-return trade-off.

The varying levels of risks associated with different investments require you to understand your risk tolerance and then proceed to assess if the volatility of the asset you’re interested to invest in is aligned to your risk profile. Cryptocurrencies are the riskiest asset that you can put your hard-earned money on; it can give you a significant rate of returns but conversely, you must be prepared for the possibility of a huge loss, given the extreme volatility of cryptocurrency prices. We have already seen the aftereffects of the 2018 market crash where prices tumbled by close to 90%.

(See also: Is it Too Late to Buy Bitcoin and Is It too Late to Invest in Cryptocurrency?)

What Causes Volatility in the Cryptocurrency Market?

There are multiple reasons that contribute to the highly volatile and unstable environment. Let’s take a look at the major factors.

1) Infant Market

A young market backed by a new technology would be much more volatile than traditional investments that are mature and have been time-tested. Just as when the internet was a revolutionary back in the 1990s and Internet-related companies were generating significant rates of returns, the cryptocurrency market is currently in a similar cycle. New technologies take time to be perfected and adopted by the general masses, and there is a high risk of failure since there are many things that can go wrong. The possibility of future disruptions and adoption creates the perceived value in the market, which is primarily fueled by speculation due to the absence of solid, quantifiable metrics relating to the technology’s fundamentals.

Since cryptocurrencies haven’t reached mass adoption, its values is still fueled by hype and speculation. That is why they possess a high risk-return trade-off.

(Read more: A Guide To Fundamental Analysis For Cryptocurrencies)

2) Low Liquidity (relative to other markets)

Liquidity refers to the ease of buying or selling an asset in the open market. A market with a high volume of transactions with a vibrant number of market participants (buyers and sellers) is known as a highly liquid market. Unfortunately, the relative infancy of the cryptocurrency market means that its liquidity is currently very low. Looking at the trading pairs of many coins, you can see that the daily trading volume is nothing as compared to the values of other traditional investments such as the stock markets.

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Master The Crypto by Aziz, Founder Of Master The Crypto - 7M ago

CryptoProfile ICO Review: A comprehensive review and analysis on CryptoProfile ICO, which aims to create a consolidated marketing airdrop platform.

Note: This represents the writer’s personal opinions and does not – in any way- constitute a recommendation of an investment or financial advice. Please assume caution when investing in cryptocurrencies and do so at your own risk, as it is extremely volatile and you can lose your money.

Overview

CryptoProfile is a leading blockchain marketing agency that is creating a consolidated airdrop platform for the ICO market. The goal of the platform is to connect Initial Coin Offering (ICO) projects with a large network of cryptocurrency enthusiasts, with various services that would significantly enhance a project’s marketing campaigns. The core services of the platform will include Education, Airdrops, Bounties and Investment opportunities.

With the airdrop platform, CryptoProfile is trying to solve 2 core issues:

  1. Unreliable Airdrop Mechanisms: Airdrops have been a unique mechanism in the cryptocurrency market with the main function of distributing free tokens from ICO projects to the masses for publicity and marketing purposes. However, the existing airdropping mechanisms are often m annual and unreliable, especially for participants that possess a financial incentive – such as marketers, writers, partners, and referrers – that enhances the exposure and publicity of the ICO.
  2. Shady ICO Practices: It is no secret that the ICO market is rife with shady practices, money-grabs, scams and Ponzi schemes that prey on vulnerable participants in the cryptocurrency market. The absence of any regulations makes it easy for ICO projects with ill-intent to get away with their schemes. Alternatively, the high failure rates of ICOs are a result of the lack of product viability.

(See more: Dangers in Cryptocurrency Investing)

Application

CryptoProfile looks to streamline the airdropping process while preserving a rigorous standard of business acumen since the success of its platform is directly correlated with the success of the ICOs within the ecosystem. Here is a visual flow of how the platform will function:

The airdrop mechanism instituted by CryptoProfile will run as follows:

  1. ICO Projects on-boarded by CryptoProfile will need to upfront USD100k for the marketing exposure and services of the network. In return for that, USD 100k value of CP tokens will be given to the ICO project.
  2. The CP tokens returned to the ICO project will be locked up in a smart contract for six months and released when the project has successfully listed their native tokens on an exchange.
  3. The ICO project will need to allocate 10% of their ICO token to CryptoProfile, which thereafter allocate 100% of that token pool and airdrop to CP token holders in order to further stimulate interest and participation from the cryptocurrency community
  4. All CP token holders will be rewarded with airdropped tokens each time an ICO is onboarded into the CryptoProfile network.
  5. There is also an avenue for CP token holders to invest transparently on the ICOs which interest them within the CryptoProfile ecosystem.

Due Diligence Mechanism

Every ICO project will need to be screened thoroughly to ensure that they conform to the standards set by CryptoProfile. The due diligence mechanism is as follows:

  1. Business Viability: The project must be able to address a current problem with an adequate target market and feasible cash-flow predictions.
  2. Technology: The project must be backed by a sound technological base that works and fits the overall project goals.
  3. Token Economics: A stable token economic model is a pivotal factor in the success of the project. Key variables to look out for is the degree of centralization, escrow mechanisms and the synergy of the tokens with stakeholders’ interest
  4. Team: The team working on the product must be qualified with the necessary skills and dynamism for the project’s success.
  5. Coin Utility: The value of any token is fully contingent on its utility. There must be a solid use-case and application for the tokens within the ecosystem.
  6. Regulation: Given the increased scrutiny of the greater cryptocurrency market, the regulatory aspects of any project will need to be analyzed within the context of its jurisdiction before anything else.

(Read also: Why do people hate Bitcoin & Cryptocurrencies? Here’s 5 Common Misunderstandings)

Unique Selling Point
  • Novel Economic Model: CryptoProfile is one of the first platforms that focus on creating a consolidated airdrop platform for ICO projects. The platform naturally aligns the long-term interests of stakeholders, with listed ICO projects getting the marketing exposure from the extensive network of investors who hold CryptoProfile’s native tokens (called CP). CP holders are financially incentivized to also increase the marketing exposure of ICO projects within the ecosystem through the consolidated airdrop mechanism.
Team

Here is CryptoProfile’s team:

All of the team members of CryptoProfile is based in the country of its incorporation, which is in Singapore. There is a total of 7 core members that make up the team, headed by Max Ng, the managing director. Max has been in the cryptocurrency space since 2012, focusing on cryptocurrency education and trading on his previous endeavors. He has also been credited as creating a global charting methodology with an estimated accuracy of 80% on speculation detection. Along with his co-founders, they are advisors to various ICO projects in the early stage round. A notable highlight is CryptoProfile’s Global Business Development Director, Amarpreet Singh, who is rated as one of the top 10 Global ICO/STO Advisor and was a former economic advisor to the World Bank.

(See more:  Types of Coins to Diversify Your Crypto Portfolio & Manage Risks)

Traction

Partnerships

Here are Cryptoprofile’s partners:

Cryptoprofile has partnered with various educational entities such as the Institute of Blockchain, WebLearningResources, and IKIGuide. This is aligned with their initial focus of spearheading cryptocurrency awareness and education to the cryptocurrency community. CryptoProfile are also active in the cryptocurrency events space, partnering the likes of BlockShow (by CoinTelegraph).

Roadmap

Here is CryptoProfile’s roadmap:

CryptoProfile has been operating since the third quarter of 2016, beginning with educational services and resources for the greater cryptocurrency community. It has then grown into a full-suite marketing agency that has established itself in the Asian region. The pre-sale and actual ICO will take place in the first..

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Master The Crypto by Aziz, Founder Of Master The Crypto - 7M ago

This year-end review takes a look at 5 valuable lessons from the cryptocurrency market in 2018, a year filled with mixed emotions!

2018 has been a memorable year for the cryptocurrency market, with many talking points throughout the year. Granted, 2018 has been characterized as a tumultuous year due to the devastating market crash that saw cryptocurrency prices losing more than 80% of their value. Perhaps the best indicator of the cryptocurrency market is Bitcoin, which represents the first and largest decentralized cryptocurrency according to market capitalization. From a historic high of close to $20,000, Bitcoin’s price – as well as the price of all coins and tokens – took a deep plunge since the start of the year.

Here’s a chart for Bitcoin’s prices in 2018:

Due to the intensity of the crash, many theorized that the cryptocurrency ‘bubble’ has popped or worse, that cryptocurrencies are headed towards extinction. However, this article will take a look at the positive outcomes that can be extracted throughout this tragic year.

With every setback, there are always lessons to be learnt.

Let’s explore five valuable lessons from the cryptocurrency market in 2018.

(See also: Bitcoin vs Alt Coins Returns: Comparison of Gains Between Bitcoin & Altcoins Investing)

Lesson #1: The Market is Crazy

The cryptocurrency market is extremely erratic and volatile. The entire industry isn’t regulated, thereby creating a hotbed for scams, ponzi schemes and ‘money-grab’ projects. Adding to the mix, it is common knowledge for cryptocurrency exchanges to engage in the manipulation of market prices and trade volume. And yes, the market is abundant with illegal activities that you wouldn’t normally get away in traditional investment markets. Insider trading, money-laundering and pump & dumps involving cryptocurrencies are a norm.

No one can deny the revolutionary nature of blockchain technology, but the negative elements that entails the cryptocurrency market – as mentioned above – can be crazy to consider. The worrying part is that anyone can participate in the markets since there is little safeguards. This means that the average Joe with no investing knowledge or even an understanding in the technology can dabble in cryptocurrencies and possibly gamble their life-savings away. We can learn a thing or two from Harold, pictured below:

(Read more: Dangers in Cryptocurrency Investing)

Lesson #2: Nobody Can Predict The Markets

The infancy of the technology coupled with the extreme volatility of the market makes it close to impossible for anyone to predict where prices will be in any time frame. This shouldn’t come as a surprise since the traditional models to value assets and make any credible predictions on its valuations do not apply to cryptocurrencies. Why? Because cryptocurrency projects are not regulated and therefore would most likely not have any financial statements in the form or cashflow records, balance sheets and profit & loss (P&L) statements. Without the traditional financial metrics, it is hard to fundamentally assess and quantify the real value of cryptocurrencies. Anyone can come up with a prediction of Bitcoin’s prices for tomorrow or even next year, but there won’t be any credibility without a quantifiable and proven metrics that substantiates the claims.

The market is constantly filled with experts and gurus that have given predictions. Almost all of the predictions completely miss the mark, no matter if they were slightly conservative or outright ambitious. Take a look at John Mcafee, the cybersecurity guru that cuts a polarizing figure in the cryptocurrency world. He predicted that Bitcoin would reach a price of $1 million by 2020.

Some of these predictions are controversial in nature and hold little to no predictive value. Even Wall Street’s most prominent Bitcoin forecaster – Tom Lee – has given up predicting Bitcoin’s prices after many failed predictions throughout 2018. He wrote to his clients:

“We are tired of people asking us about target prices…Because of the inherent volatility in crypto, we will cease to provide any timeframes for the realization of fair value.”

That basically sums up the unfortunate state of price predictions in the cryptocurrency market.

(See more: Crypto ICO vs. Stock IPO: What’s the Difference?)

Lesson #3: High Risk, High Returns

Traditional financial theory states that the potential returns that one can expect from their investments is directly correlated to the level of risk an asset possess. In other words, higher risks equates to potentially higher returns.

It is apparent that cryptocurrencies are the most riskiest investment that you can make due to the relative infancy of the technology, the absence of regulations and the extreme price fluctuations. Additionally, it is not surprising to hear of cryptocurrency exchanges manipulating prices in the market.

Let’s take a look at the fluctuations of cryptocurrency’s market capitalization to get a sense of their volatility:

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