Decentralized systems, such as Blockchain, have brought a new challenge to large companies — and even governments — to stay at the forefront in the implementation and development of blockchain technology.
Some experts have claimed blockchain to be the greatest technological revolution since the Internet, with recent events beginning to confirm this. But how can you invest in the blockchain? In this article we approach it from a “cryptographic perspective” and present 3 ways to start your blockchain investments.
Fundamental analysis: learn how your favorite projects use blockchain technology
With more than 6,500 cryptocurrencies listed on the market, it is difficult to identify projects that have achieved really useful blockchain engineering with a future. It’s not just about hunting down cryptocurrencies with favourable price action – although that’s a factor to consider – but delving into the mission and use-case of the project.
Thus, it is crucial to make a careful reading of the “technical reports” of each currency, to understand the approach they have taken and the mechanisms they have combined this technology to achieve their objective. Concepts such as sharding, used by cryptocurrencies such as Zilliqa, leverage the scalability of blockchain and its use in real environments.
However, technology is just one of many factors an analyst considers. It is also important to understand how the project will achieve its objectives, taking a look at the task force, the roadmap, and the current conditions of the network. It is also important to know how the project will connect with its analogues in the industry, but also outside it.
Ethereum, for example, has been built and designed to facilitate adoption for use-cases. This ecosystem houses more than a 1,000 tokens that today are part of the crypto sphere. Other solid projects like Chainlink, connect smart contracts with real-world data and applications without compromising security.
In any case, it is important to do thorough research on your favourite cryptocurrencies, taking a step further to determine the potential of each project. Likewise, tracking news related to the cryptocurrency in question is crucial to be aware of important events and changes.
Choose a secure platform to start investing in blockchain projects
Once the initial fundamental analysis is completed, it is important to do a technical analysis of the price of your chosen cryptocurrency to identify areas of support and resistance, in addition to other indicators based on your trading strategy.
Some prefer to gamble in the short term and do constant trading, while others choose to invest in the long term.
Bitcoin, the market leader in cryptocurrencies, is considered the cornerstone of the blockchain. In the last five years, the price of Bitcoin has skyrocketed by more than 4,000%, a feat that few assets manage to surpass. However, other promising projects have not had the same luck.
Despite success stories, such as the one mentioned above, the volatility of this emerging market raises the level of complexity for not only in finding a good investment prospect, but also in deciding on a good entry point. This is why technical analysis and comparison with the perspectives of other traders can be crucial.
Another determining factor is the prominence of use cases and adoption, which could give us that final push to make an investment. Some concepts, such as Decentralized Finance (DeFi) are also starting to gain traction, and many cryptocurrencies feature DeFi solutions built on the blockchain.
To invest, ideally one would choose a regulated broker or a reputable exchange, where the safety of your funds is guaranteed. Users must also adhere to basic good security practices for any online platform. Recommended platforms to get started include:
Combining cryptocurrencies with shares of companies that bet on the blockchain
Another way to invest in blockchain is to buy shares in public companies that are committed to this technology to optimise, secure and decentralize their processes and systems. Despite the fact that Bitcoin is the pioneer in the use of blockchain, this concept can be implemented in networks and systems that do not necessarily include digital assets.
Blockchain developments have not only become an important project for many companies, but have come to be considered a government priority in some places.
The Chinese Government, for example, has encouraged the development of these projects, giving them priority and financial support. Primarily, China has been pushing the development of a new central bank digital currency (CBDC), the digital yuan.
Which companies have decided to invest in blockchain?
Forbes recently published a list of the top 50 companies to adopt blockchain. Some of them are high profile and listed on the stock exchange. Several stand out in the financial sector, such as Credit Suisse, Citigroup or JPMorgan Chase. Other giants such as Amazon, IBM, BMW, Microsoft, Google and Banco Santander have also incorporated working groups specialised in blockchain developments, giving an unprecedented importance to this technology.
The list also includes other companies that have yet to carve out a foothold on Wall Street, but could be very close to doing so. Among them are Ripple Labs (the giant behind XRP token), Coinbase or Bitfury.
This is where the concept of portfolio diversification comes in, one of the essential tools of any professional trader. A Fidelity article explains that diversification is “designed to reduce the volatility of your portfolio over time.” Thus, many investors use regulated brokers where they have a wide variety of financial instruments at their fingertips, making them able to combine cryptocurrency trading with other assets, such as stocks or raw materials. Some of the recommended platforms on our portal are included in this list: