From scams to hi-risk trading to lack of regulation, is crypto trading a no-man’s land today?

The “wild west” in American history was a time when laws were few and people lived and died by taking big risks. There were outlaws who robbed stagecoaches and trains; disputes were settled by shoot-outs; every day, individuals put their lives on the line.

Many have likened cryptocurrency trading to the wild west of American history. There are scammers in the business; there are risks involved in purchasing startup cryptos that have no history whatsoever; and regulation of the cryptocurrency markets are still few in number.

The Current Landscape

As of January 2018, there were a total 1,381 cryptocurrencies listed on CoinMarketCap.com, and new ICO’s (initial coin offerings) are hitting the market every week. And some of these coins have realized amazing gains for investors. Consider Bitcoin alone. It was worth just pennies when it launched and is selling today, even with great volatility, around US$11,000.

Also read: When will cryptocurrencies go mainstream? Only when one of them offers a stable price

It’s no wonder that investors are looking at cryptocurrency as the next way to make a bundle on the market, if, and this is a big if, they can pick a few that will actually grow the way others have. There are no guarantees, of course, and the risks of losing all of one’s investment money are great.

Yet, there are some things that a savvy investor can do to reduce the risk factors in crypt investing. Here are a few.

Only Invest What You Can Afford to Lose

This is a “tried and true” principle of investing in any risky venture. Identify an investment amount that, if you lost every penny, would not significantly alter your lifestyle or financial health.

Do Your Research

The cryptos that have had “staying power” and that have realized significant gains are those with solid leadership at the helm. Before investing in any crypto, do your research. Who are the people in charge? What are their backgrounds and histories in financial and other enterprises? This is one way to avoid being taken in by scammers who are using many methods to get their hands on investor dollars and even their crypto wallets.

  • Fake ICO’s are not easy to detect, but if an investor looks for endorsements from reputable sources and some type of white paper that outlines goals and plans, there is less risk.
  • Email scams are also abundant and are used to prompt investors to login to a fake site, provide critical information, and have their wallets emptied. Never give out a private key.
  • There are also fake exchanges. Better to always go with reputable, longer histories, and popular exchanges.

Make Use of the Analytics Tools Out There

Big data and machine learning are all about gathering huge amounts of information, sorting it all, making sense of it, and then offering solid scientifically-based predictions. Signals Network, for instance, has developed a new type of marketplace, where any investor can choose data, indicators and strategy inputs and bundled them up into an automated, personalized trading strategy.

Also read: Southeast Asia is capitalising on crypto and blockchain tech better than other regions

Basically, the tool allows any investor with or without coding skills to create a robust trading platform, matching their current needs and investment style. The developed algorithm is powered by machine learning and based upon real data that will provide far more solid predictions than “gut feeling” or nebulous “insider tips.”

Watch Government Interventions

While regulations of cryptocurrencies and trading are still in infant stages, governments are sitting up and taking notice of this huge market and beginning to regulate. China, for example, closed all of its domestic cryptocurrency investment platforms some time ago. It is now moving to block offshore crypto trading on the part of its citizens, stating that cryptocurrency trading constitutes illegal financing.

In France, regulators area forcing cryptocurrency trading platforms to conform to its financial reporting and business conduct standards. Platforms may not, for example, advertise electronically. And South Korea is vowing to take some strong action.

In the U.S., cryptocurrency remains a very gray area, but discussions are occurring. The SEC recently testified before congress on the subject of trading regulations, but they focused more on providing information on risks and fraud to investors. Agencies are still in the stages of defining whether cryptos are unregistered currencies or commodities. Still, investors should keep a close eye on these discussions.

Yes, cryptocurrency is still in its infancy. And just like the wild west in America, markets are unsteady, volatile, and many currencies that are around today will not be here a few years from now. The wise investor will follow these tips as he dips into this largely still un-solidified market.

—-

Editor’s note: e27 publishes relevant guest contributions from the community. Share your honest opinions and expert knowledge by submitting your content here.

Featured Image: 123RF

The post Is cryptocurrency trading still a financial wild west? appeared first on e27.