How to invest in blockchain?31. December 2020
The so-called “blockchain” industrial sector has benefited from a great promotion by the general media in recent years, to the detriment of cryptocurrencies. Several companies see it as a major disruption, and are quick to create dedicated research and development sections.
From an investor’s perspective, “blockchain” holds the promise of huge returns . But which blockchain are we talking about? How to invest in this sector?
Blockchain or blockchains?
The expression “ the blockchain ” comes to us from a time – not so long ago – when the only one that existed was that of Bitcoin . Now, there are several thousand different cryptocurrencies and blockchains . Some decentralized platforms no longer use this data structure. For example, this is the case of Crypto Bull or Avalanche, which work with an acyclic directed graph system .
The blockchain is a term generic and vague . It encompasses all distributed ledger technologies in the broad sense. They can be decentralized on all fronts, like Bitcoin or Ethereum. But they are also platforms developed by large companies, and even States.
When we talk about investing in blockchain , it usually means that we want to invest money in one of the many emerging projects in this ecosystem … Hoping to hit the jackpot.
Investing in blockchain technologies, is it still possible?
The answer is of course yes ! However, it should be understood that the year 2017 saw a Cambrian explosion of blockchains. The market is now saturated with worthless projects, or pale copies of existing projects.
The budding investor must therefore bear in mind that finding the latest technological nugget requires extensive knowledge . It is important to understand the existing technologies and their limitations.
Likewise, it should be borne in mind that the brightest minds in computing and distributed systems have more or less all started their own projects . Entrusting millions of dollars to an unknown development team is a risky bet .
In addition to the technical prerequisites, you must also have a good vision of the crypto-asset market . The investor should look for a project that has the potential to build a strong community .
These are of course future users, but also traders . Indeed, liquidity is a very important factor. Owning an asset that has achieved good growth, but without being able to take profits because of an illiquid market is a very frustrating experience.
The different ways to invest in the blockchain sector
Depending on your investor profile and your financial means , there are different ways to invest in this sector.
The easiest way is obviously to go to a foreign exchange platform . Then just buy the token of the project that you find promising. As you probably already know, a token is a financial, digital and decentralized asset , conferring rights on its holder. These may be voting rights, or even shares in the issuing company.
The big advantage of tokens over traditional financial securities is their high liquidity . It is possible to buy or sell them on the markets with a few clicks.
For example, let’s say you want to invest in a blockchain project dedicated to decentralized exchanges (DEX). You have chosen the 0x protocol . All you have to do is place a buy order at a level that you find interesting. Once you are in possession of your tokens, you may wish to realize a gain , for example at the next level of price resistance. You just have to place your take profit at this level, and you’re done. When the price of ZRX reaches the desired price, your trade will be executed and you will pocket your capital gain.